The investment brokerage said it entered a definitive agreement to acquire Cole Capital Partners and Cole Capital Advisors for $700 million plus contingent consideration. The acquisition includes a broker-dealer, wholesale distribution, and a non-traded real estate investment trust, or REIT, sponsor and advisory businesses, according to RCS Capital.
RCS Capital expects the acquisition will contribute about 51 cents a share to its 2015 earnings, depending on the amount of additional consideration it has to pay in 2016. The company expects the acquisition to generate $109 million of 2015 estimated EBITDA.
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TheStreet Ratings team rates RCS CAPITAL CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate RCS CAPITAL CORP (RCAP) 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 robust revenue growth, solid stock price performance and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RCAP's very impressive revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues leaped by 177.6%. 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.
- Compared to its closing price of one year ago, RCAP's share price has jumped by 42.43%, exceeding the performance of the broader market during that same time frame. Although RCAP had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- Compared to other companies in the Capital Markets industry and the overall market, RCS CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for RCS CAPITAL CORP is rather low; currently it is at 15.30%. Regardless of RCAP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RCAP's net profit margin of 7.55% is significantly lower than the industry average.
- Net operating cash flow has significantly decreased to -$108.86 million or 468.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: RCAP Ratings Report