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Here's Why Owl Rock Capital (ORCC) is a Strong Buy Stock Now
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Owl Rock Capital Corporation is well-poised to grow on the back of a high interest rate environment, a diversified portfolio and a solid inorganic growth strategy. Shares of ORCC have climbed 13.6% in the past three months compared with the industry’s 5% growth.
Owl Rock Capital, with a market cap of $4.7 billion, is a specialty finance company that lends funds to U.S. middle market companies. Based in New York, ORCC operates as a business development company. Courtesy of solid prospects, this Zacks Rank #1 (Strong Buy) stock is worth obtaining at the moment.
The Zacks Consensus Estimate for Owl Rock Capital’s current-year earnings is pegged at $1.41 per share, which has witnessed six upward estimate revisions in the past 60 days against none in the opposite direction. The estimate indicates 12.8% year-over-year growth. Our estimate of $1.39 per share suggests 11.8% year-over-year growth in earnings.
ORCC beat on earnings in two of the last four quarters and missed once, the average being 2%.
Owl Rock Capital Corporation Price and EPS Surprise
While the consensus mark for current-year revenues of $1.2 billion is signaling a 15.5% year-over-year increase, our estimate suggests 13.4% year-over-year growth.
Key Drivers
The rising interest rate environment is expected to drive ORCC’s net investment income in the coming days. Our estimate for Total Controlled, Affiliated Investment Income for 2022 suggests more than 220% year-over-year growth.
Upper-middle market firms, with predictable operations having minimum risk and strong cash flows, are the major contributors to Owl Rock Capital’s solid portfolio health. Its diversified portfolio, with balanced weightage in different industries, is expected to ensure growth even in tough times. A hefty portion of its investments is in Senior Secured form, which can enable it to avoid the impacts of the recession.
The company has a prudent inorganic growth story, with a far-sighted acquisition strategy. Deals like Baltimore Acquisition, Blue Owl Capital, the Wellfleet CLO business and others keep strengthening its portfolio, while generating substantial credit sources. It has solid merger and acquisition deals in the pipeline.
ORCC’s dividend yield stands at 10.5%, much higher than the industry's average of 2.6%. It boasts a prudent capital deployment history in forms of share repurchases, and regular and supplemental dividend payments. The board of directors at the company increased regular dividends to 33 cents per share, up sequentially by 2 cents.
Moreover, it introduced a supplemental dividend plan, where it intends to return a significant portion of excess earnings to investors. This shows the company’s confidence in its operations.
ORCC’s forward 12-month price-to-earnings value stands at 7.1X, much lower than the industry average of 10.4X. This shows that the stock is undervalued and has more room left to run.
Key Risks
There are a few factors that investors should keep in mind.
Owl Rock Capital’s rising expenses might put pressure on margins. Our estimate for 2022 net operating expenses suggests more than 15% year-over-year growth. Also, a low return on equity compared with the industry can be worrisome. Nevertheless, we believe that a systematic and strategic plan of action will drive ORCC’s growth in the long term.
Other Top-Ranked Players
Some other top-ranked stocks in the broader finance space are CI Financial Corp. , MGIC Investment Corporation (MTG - Free Report) and Unum Group (UNM - Free Report) . While CI Financial sports a Zacks Rank #1 at the moment, MGIC Investment and Unum have a Zacks Rank #2 (Buy).
Based in Toronto, CI Financial is a leading asset management holding company. The Zacks Consensus Estimate for CIXX’s next-year earnings indicates an 11.9% year-over-year increase.
Headquartered in Milwaukee, WI, MGIC Investment provides private mortgage insurance and other products in the domestic markets and internationally. The Zacks Consensus Estimate for MTG’s current-year earnings indicates a 49.7% increase from the prior-year reported number.
Based in Chattanooga, TN, Unum is a financial protection benefit solutions provider. The Zacks Consensus Estimate for UNM’s 2022 bottom line indicates a 43.5% improvement from a year ago.
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Here's Why Owl Rock Capital (ORCC) is a Strong Buy Stock Now
Owl Rock Capital Corporation is well-poised to grow on the back of a high interest rate environment, a diversified portfolio and a solid inorganic growth strategy. Shares of ORCC have climbed 13.6% in the past three months compared with the industry’s 5% growth.
Owl Rock Capital, with a market cap of $4.7 billion, is a specialty finance company that lends funds to U.S. middle market companies. Based in New York, ORCC operates as a business development company. Courtesy of solid prospects, this Zacks Rank #1 (Strong Buy) stock is worth obtaining at the moment.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Trend in Estimates
The Zacks Consensus Estimate for Owl Rock Capital’s current-year earnings is pegged at $1.41 per share, which has witnessed six upward estimate revisions in the past 60 days against none in the opposite direction. The estimate indicates 12.8% year-over-year growth. Our estimate of $1.39 per share suggests 11.8% year-over-year growth in earnings.
ORCC beat on earnings in two of the last four quarters and missed once, the average being 2%.
Owl Rock Capital Corporation Price and EPS Surprise
Owl Rock Capital Corporation price-eps-surprise | Owl Rock Capital Corporation Quote
While the consensus mark for current-year revenues of $1.2 billion is signaling a 15.5% year-over-year increase, our estimate suggests 13.4% year-over-year growth.
Key Drivers
The rising interest rate environment is expected to drive ORCC’s net investment income in the coming days. Our estimate for Total Controlled, Affiliated Investment Income for 2022 suggests more than 220% year-over-year growth.
Upper-middle market firms, with predictable operations having minimum risk and strong cash flows, are the major contributors to Owl Rock Capital’s solid portfolio health. Its diversified portfolio, with balanced weightage in different industries, is expected to ensure growth even in tough times. A hefty portion of its investments is in Senior Secured form, which can enable it to avoid the impacts of the recession.
The company has a prudent inorganic growth story, with a far-sighted acquisition strategy. Deals like Baltimore Acquisition, Blue Owl Capital, the Wellfleet CLO business and others keep strengthening its portfolio, while generating substantial credit sources. It has solid merger and acquisition deals in the pipeline.
ORCC’s dividend yield stands at 10.5%, much higher than the industry's average of 2.6%. It boasts a prudent capital deployment history in forms of share repurchases, and regular and supplemental dividend payments. The board of directors at the company increased regular dividends to 33 cents per share, up sequentially by 2 cents.
Moreover, it introduced a supplemental dividend plan, where it intends to return a significant portion of excess earnings to investors. This shows the company’s confidence in its operations.
ORCC’s forward 12-month price-to-earnings value stands at 7.1X, much lower than the industry average of 10.4X. This shows that the stock is undervalued and has more room left to run.
Key Risks
There are a few factors that investors should keep in mind.
Owl Rock Capital’s rising expenses might put pressure on margins. Our estimate for 2022 net operating expenses suggests more than 15% year-over-year growth. Also, a low return on equity compared with the industry can be worrisome. Nevertheless, we believe that a systematic and strategic plan of action will drive ORCC’s growth in the long term.
Other Top-Ranked Players
Some other top-ranked stocks in the broader finance space are CI Financial Corp. , MGIC Investment Corporation (MTG - Free Report) and Unum Group (UNM - Free Report) . While CI Financial sports a Zacks Rank #1 at the moment, MGIC Investment and Unum have a Zacks Rank #2 (Buy).
Based in Toronto, CI Financial is a leading asset management holding company. The Zacks Consensus Estimate for CIXX’s next-year earnings indicates an 11.9% year-over-year increase.
Headquartered in Milwaukee, WI, MGIC Investment provides private mortgage insurance and other products in the domestic markets and internationally. The Zacks Consensus Estimate for MTG’s current-year earnings indicates a 49.7% increase from the prior-year reported number.
Based in Chattanooga, TN, Unum is a financial protection benefit solutions provider. The Zacks Consensus Estimate for UNM’s 2022 bottom line indicates a 43.5% improvement from a year ago.