NEW YORK (TheStreet) -- American Capital (ACAS) shares are soaring by 7.63% to $14.96 on heavy trading volume on Wednesday morning, after the private equity firm and global asset manager announced earlier today that it's planning to undertake a strategic review and increase share buybacks.
The company is looking to maximize shareholder value and noted that it hired Goldman Sachs and Credit Suisse to help the company in the review.
CEO Malon Wilkus stated that he is fully supportive of the strategic review, adding, "We have generated a 16% annualized growth rate in both our book value and price per share over the five years ended September 30, 2015."
Along with this announcement, the company's board of directors expanded its current stock buyback program to between the range of $600 million to $1 billion, above its previous range of $300 million to $600 million.
Separately, TheStreet Ratings team rates AMERICAN CAPITAL LTD as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
We rate AMERICAN CAPITAL LTD (ACAS) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 132.4% when compared to the same quarter one year ago, falling from $114.00 million to -$37.00 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market, AMERICAN CAPITAL LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- After a year of stock price fluctuations, the net result is that ACAS's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- AMERICAN CAPITAL LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERICAN CAPITAL LTD increased its bottom line by earning $1.56 versus $0.50 in the prior year. For the next year, the market is expecting a contraction of 20.2% in earnings ($1.25 versus $1.56).
- Net operating cash flow has significantly increased by 73.80% to $73.00 million when compared to the same quarter last year. Despite an increase in cash flow of 73.80%, AMERICAN CAPITAL LTD is still growing at a significantly lower rate than the industry average of 272.40%.
- You can view the full analysis from the report here: ACAS