American Realty Capital Properties Inc. (ARCP) announced last week certain accounting misstatements, prompting RCS Capital's board of directors to announce that they have taken "a number of steps to ensure the continued strength and financial integrity of the company's wholesale distribution platform and its overall business."
"Given the corporate announcements made by American Realty Capital Properties (ARCP) since October 29, and the effect those announcements have had on RCAP's market valuation, RCAP would like to clarify its relationship with ARCP," the company said.
Real estate mogul Nicholas Schorsch is chairman of both companies.
RCS Capital reiterated that it and American Realty Capital Properties are two separate and independent public corporations, emphasizing the they have separate management teams, separate and distinct boards of directors, separate and distinct accounting functions, and are competitors in non-traded REIT distribution.
Lastly, the RCAP Board, Audit Committee and its management team said they have full confidence in RCAP's reported financials, accounting and internal controls and look forward to providing additional detail on RCAP's earnings conference call which is scheduled for Thursday, November 13.
Shares of American Realty Capital Properties are up 5.37% to $8.50.
Separately, 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, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RCAP's very impressive revenue growth greatly exceeded the industry average of 5.1%. 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.
- 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 23769.3% when compared to the same quarter one year prior, rising from $0.20 million to $48.22 million.
- 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