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
NEW YORK (
-- THL Credit
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 16.9%. Since the same quarter one year prior, revenues rose by 12.9%. 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 61.65%. Regardless of TCRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCRD's net profit margin of 57.81% significantly outperformed against the industry.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Capital Markets industry average. The net income increased by 9.4% when compared to the same quarter one year prior, going from $9.78 million to $10.69 million.
- THL CREDIT INC's earnings per share declined by 18.4% in the most recent quarter compared to 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, THL CREDIT INC increased its bottom line by earning $1.45 versus $1.26 in the prior year. For the next year, the market is expecting a contraction of 5.5% in earnings ($1.37 versus $1.45).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, TCRD has underperformed the S&P 500 Index, declining 8.17% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
THL Credit, Inc. is a business development company specializing in direct and fund of fund investments. The fund seeks to invest in debt and equity securities of middle market companies. THL Credit has a market cap of $469.2 million and is part of the financial sector and financial services industry. Shares are down 16.1% year to date as of the close of trading on Friday.
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