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Why Prospect Capital (PSEC) Stock Is Up Today

Stocks in this article: PSEC

NEW YORK (TheStreet) -- Prospect Capital (PSEC) was gaining 4.8% to $10.29 Wednesday following an SEC ruling that it won't have to restate its past earnings.

The SEC previously said certain wholly-owned holding companies had to be consolidated into Prospect's reports, but ruled the company doesn't have to restate those results after Prospect appealed. In a press release Prospect said it will begin consolidating certain holding companies on a prospective basis "in order to facilitate its investment strategy."

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TheStreet Ratings team rates PROSPECT CAPITAL CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate PROSPECT CAPITAL CORP (PSEC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PSEC's very impressive revenue growth greatly exceeded the industry average of 5.1%. Since the same quarter one year prior, revenues leaped by 58.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.45%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.13% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 84.8% when compared to the same quarter one year prior, rising from $44.43 million to $82.10 million.
  • PROSPECT CAPITAL CORP has improved earnings per share by 30.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PROSPECT CAPITAL CORP reported lower earnings of $1.07 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($1.27 versus $1.07).
  • 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, PROSPECT CAPITAL CORP's return on equity is below that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: PSEC Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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