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. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."Full Circle Capital Corp BDC (NASDAQ: FULL) shares currently have a dividend yield of 12.00%. Full Circle Capital Corporation is a business development company and operates as an externally managed non-diversified closed-end management investment company. The company has a P/E ratio of 38.50. Currently there are no analysts that rate Full Circle Capital Corp BDC a buy, no analysts rate it a sell, and 1 rates it a hold. The average volume for Full Circle Capital Corp BDC has been 83,500 shares per day over the past 30 days. Full Circle Capital Corp BDC has a market cap of $58.3 million and is part of the financial services industry. Shares are up 4.3% year to date as of the close of trading on Friday. TheStreet Ratings rates Full Circle Capital Corp BDC as a hold. The company's strongest point has been its very decent return on equity which we feel should persist. At the same time, however, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- The revenue fell significantly faster than the industry average of 9.8%. Since the same quarter one year prior, revenues fell by 22.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- FULL CIRCLE CAPITAL CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FULL CIRCLE CAPITAL CORP reported lower earnings of $0.44 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.81 versus $0.44).
- In its most recent trading session, FULL has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The gross profit margin for FULL CIRCLE CAPITAL CORP is currently extremely low, coming in at 1.30%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -35.51% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$1.80 million or 146.56% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Full Circle Capital Corp BDC Ratings Report.
- 48.30% is the gross profit margin for NUTRISYSTEM INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -8.04% trails the industry average.
- NTRI has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
- The revenue fell significantly faster than the industry average of 25.5%. Since the same quarter one year prior, revenues slightly dropped by 6.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, NUTRISYSTEM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$12.38 million or 73.21% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full NutriSystem Ratings Report.
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 76.8% when compared to the same quarter one year prior, rising from -$1.57 million to -$0.36 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 4.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, CORENERGY INFRASTRUCTURE TR has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- CORENERGY INFRASTRUCTURE TR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CORENERGY INFRASTRUCTURE TR increased its bottom line by earning $1.35 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 79.3% in earnings ($0.28 versus $1.35).
- CORR has underperformed the S&P 500 Index, declining 19.49% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full CorEnergy Infrastructure Ratings Report.
- Our dividend calendar.