Why American Capital (ACAS) Stock Is Up Today

NEW YORK (TheStreet) -- American Capital (ACAS) was gaining 4.6% to $15.70 Wednesday after launching a $1.1 billion private equity fund.

The fund, called American Capital Equity III, will focus on investing in companies in the middle market. The company expects the closing of the fund within 90 days. The fund will increase American Capital's earning assets under management by $900 million, or 7%.

"We are pleased to announce the signing of ACE III," American Capital chairman and CEO Malon Wilkus said in a press release. "ACE III significantly diversifies and enhances our asset management franchise and expands our institutional investor base. This is another example of using our well capitalized balance sheet to incubate new funds under management."

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TheStreet Ratings team rates AMERICAN CAPITAL LTD as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN CAPITAL LTD (ACAS) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."

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

  • Net operating cash flow has increased to $57.00 million or 21.27% when compared to the same quarter last year. Despite an increase in cash flow of 21.27%, AMERICAN CAPITAL LTD is still growing at a significantly lower rate than the industry average of 97.77%.
  • The gross profit margin for AMERICAN CAPITAL LTD is rather high; currently it is at 55.08%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, ACAS's net profit margin of -154.23% significantly underperformed when compared to the industry average.
  • 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 248.0% when compared to the same quarter one year ago, falling from $123.00 million to -$182.00 million.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, AMERICAN CAPITAL LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • You can view the full analysis from the report here: ACAS Ratings Report

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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.

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