Solar Capital Ltd. Stock Downgraded (SLRC)

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) -- Solar Capital (Nasdaq: SLRC) 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, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow 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 4.5%. Since the same quarter one year prior, revenues rose by 15.2%. 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.
  • 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, SOLAR CAPITAL LTD's return on equity exceeds that of both the industry average and the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 55.1% when compared to the same quarter one year ago, falling from $51.86 million to $23.30 million.
  • Net operating cash flow has significantly decreased to -$213.35 million or 648.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
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Solar Capital Ltd. is a business development company specializing in investments in leveraged middle market companies. The company has a P/E ratio of 7.4, below the S&P 500 P/E ratio of 17.7. Solar has a market cap of $1.03 billion and is part of the financial sector and financial services industry. Shares are down 3.9% year to date as of the close of trading on Thursday.

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

-- Written by a member of TheStreet Ratings Staff

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