PennantPark Floating Rate Capital Stock Upgraded (PFLT)

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 ( TheStreet) -- PennantPark Floating Rate Capital (Nasdaq: PFLT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • PFLT's very impressive revenue growth greatly exceeded the industry average of 16.7%. Since the same quarter one year prior, revenues leaped by 72.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 243.2% when compared to the same quarter one year prior, rising from $1.77 million to $6.06 million.
  • The gross profit margin for PENNANTPARK FLOATING RT CAP is rather high; currently it is at 57.92%. Regardless of PFLT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PFLT's net profit margin of 88.50% significantly outperformed against the industry.
  • PENNANTPARK FLOATING RT CAP reported significant earnings per share improvement 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, PENNANTPARK FLOATING RT CAP reported lower earnings of $1.30 versus $1.75 in the prior year. For the next year, the market is expecting a contraction of 13.1% in earnings ($1.13 versus $1.30).
  • In its most recent trading session, PFLT 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. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

PennantPark Floating Rate Capital Ltd. is a business development company. It seeks to make secondary direct, debt, equity, and loan investments. The fund seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies. PennantPark Floating Rate has a market cap of $205.3 million and is part of the financial sector and financial services industry. Shares are up 1.2% year to date as of the close of trading on Tuesday.

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

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