Why Main Street Capital (MAIN) Stock Is Lower Today

NEW YORK (TheStreet) -- Main Street Capital (MAIN) stock is trading lower on Tuesday after pricing its 4-million share offering.

By late morning, shares had tumbled 4% to $31.27. Trading volume of 1.9 million was more than six times its three-month daily average. 

The company said it will offer common stock at $31.50 a share with net proceeds after deducting underwriting discounts of around $121.4 million. The underwriters have also been granted a 30-day option to purchase up to an additional 600,000 shares. 

In a statement, Main Street Capital said it intends to use net proceeds to "purchase additional shares, to initially repay outstanding debt borrowed under its credit facility, and then through re-borrowing under the credit facility, to make investments in accordance with its investment objective and strategies, to make investments in marketable securities and idle funds investments, to pay operating expenses and other cash obligations, and for general corporate purposes."

Raymond James, Goldman Sachs, Baird & Co. and RBC Capital Markets will act as underwriters for the offering. 

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TheStreet Ratings team rates MAIN STREET CAPITAL CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate MAIN STREET CAPITAL CORP (MAIN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 27.6%. 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 MAIN STREET CAPITAL CORP is currently very high, coming in at 83.02%. Regardless of MAIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MAIN's net profit margin of 63.38% significantly outperformed against the industry.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • 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 on the basis of return on equity, MAIN STREET CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • MAIN STREET CAPITAL CORP's earnings per share declined by 30.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, MAIN STREET CAPITAL CORP reported lower earnings of $2.66 versus $3.54 in the prior year. For the next year, the market is expecting a contraction of 13.9% in earnings ($2.29 versus $2.66).
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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