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Solar Capital Ltd. Stock Upgraded (SLRC)

NEW YORK ( TheStreet) -- Solar Capital (Nasdaq: SLRC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 19.4%. Since the same quarter one year prior, revenues rose by 12.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • SLRC's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • The gross profit margin for SOLAR CAPITAL LTD is rather high; currently it is at 66.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 127.10% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $70.21 million or 39.16% when compared to the same quarter last year. Despite an increase in cash flow of 39.16%, SOLAR CAPITAL LTD is still growing at a significantly lower rate than the industry average of 244.78%.
  • SOLAR CAPITAL LTD's earnings per share declined by 6.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SOLAR CAPITAL LTD reported lower earnings of $1.69 versus $4.27 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $1.69).

Solar Capital Ltd. is a business development company specializing in investments in leveraged companies, including middle market companies. The company has a P/E ratio of 13.9, equal to the average financial services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Solar has a market cap of $808.7 million and is part of the financial sector and financial services industry. Shares are unchanged year to date as of the close of trading on Friday.

You can view the full Solar Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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