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"We rate MCG CAPITAL CORP (MCGC) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 161.4% when compared to the same quarter one year ago, falling from $8.57 million to -$5.27 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, MCG CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for MCG CAPITAL CORP is currently lower than what is desirable, coming in at 27.78%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -55.30% is significantly below that of the industry average.
- The share price of MCG CAPITAL CORP has not done very well: it is down 24.69% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- MCG CAPITAL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MCG CAPITAL CORP reported lower earnings of $0.02 versus $0.08 in the prior year. This year, the market expects an improvement in earnings ($0.09 versus $0.02).
- You can view the full analysis from the report here: MCGC Ratings Report