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THL Credit Inc. Stock Downgraded (TCRD)

Editor's Note: 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

NEW YORK (TheStreet) -- THL Credit (Nasdaq:TCRD) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 26.5%. Since the same quarter one year prior, revenues rose by 29.0%. 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.
  • The gross profit margin for THL CREDIT INC is rather high; currently it is at 63.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 50.70% significantly outperformed against the industry average.
  • Net operating cash flow has increased to -$36.51 million or 25.54% when compared to the same quarter last year. Despite an increase in cash flow, THL CREDIT INC's cash flow growth rate is still lower than the industry average growth rate of 58.60%.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has decreased by 8.9% when compared to the same quarter one year ago, dropping from $6.55 million to $5.97 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Capital Markets industry and the overall market, THL CREDIT INC's return on equity is below that of both the industry average and the S&P 500.

THL Credit, Inc. is a private equity and mezzanine firm specializing in mature, bridge, PIPES, industry consolidation, acquisition, recapitalization, change of control transactions, and growth capital investments in both sponsored and unsponsored middle-market companies. The company has a P/E ratio of 13.1, above the average financial services industry P/E ratio of 11.2 and below the S&P 500 P/E ratio of 17.7. THL Credit has a market cap of $275.2 million and is part of the financial sector and financial services industry. Shares are up 12.8% year to date as of the close of trading on Tuesday.

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

-- Written by a member of TheStreet Ratings Staff

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