NEW YORK (TheStreet) -- Prospect Capital (PSEC) was falling -2.5% to $10.47 Wednesday after the company missed analysts' estimates in the fiscal third quarter and news that the SEC ordered the company to restate financials.
For the third quarter Prospect Capital reported NII of 31 cents a share, missing the Capital IQ Consensus Estimate of 32 cents a share by 1 cent. Total Investment Income grew 58.3% to $190.32 million for the quarter. Analysts expected Total Investment Income of $192.1 million for the quarter.
In a 10-Q filing with the SEC Prospect disclosed that the agency ordered the company to "restate financials to consolidate on its balance sheet those companies in which Prospect has more than a 50% interest," according to Seeking Alpha. The company plans to appeal the SEC ruling.
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TheStreet Ratings team rates PROSPECT CAPITAL CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate PROSPECT CAPITAL CORP (PSEC) a BUY. This is driven by a few notable 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 revenue growth, compelling growth in net income, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 83.6% when compared to the same quarter one year prior, rising from $46.49 million to $85.36 million.
- The gross profit margin for PROSPECT CAPITAL CORP is rather high; currently it is at 68.21%. Regardless of PSEC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PSEC's net profit margin of 47.93% significantly outperformed against the industry.
- Net operating cash flow has significantly increased by 52.42% to -$290.63 million when compared to the same quarter last year. Despite an increase in cash flow, PROSPECT CAPITAL CORP's cash flow growth rate is still lower than the industry average growth rate of 97.77%.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, PROSPECT CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full analysis from the report here: PSEC Ratings Report