Why Prospect Capital (PSEC) Stock Is Down Today

NEW YORK (TheStreet) -- Prospect Capital (PSEC) was falling 6.6% to $9.43 Tuesday after the company announced an increase in its revolving credit facility commitments.

Prospect Capital announced it increased the total commitments to its five-year $1 billion revolving credit facility by $45 million, to an aggregate total of $837.5 million. The accordion feature of the credit facility allows Prospect to accept an aggregate of $1 billion of revolving commitments. Prospect expects to reach $1 billion in aggregate with new and existing lenders.

The new $45 commitment comes from three new lenders, bringing the total number of lenders to 27.

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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 number of 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 5.1%. 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 of 52.42%, PROSPECT CAPITAL CORP is still growing at a significantly lower rate than the industry average of 162.25%.
  • 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

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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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