It has been about a month since the last earnings report for Hercules Technology (HTGC Quick QuoteHTGC - Free Report) . Shares have lost about 49.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hercules Tech due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Hercules Capital Q4 Earnings Beat, Revenues Escalate

Hercules Capital’s fourth-quarter 2019 net investment income of 38 cents per share outpaced the Zacks Consensus Estimate of 36 cents. The bottom line grew 18.8% from the year-ago quarter’s reported figure.

Results benefited from higher total investment income and an increase in net asset value. However, rise in operating expenses acted as a headwind.

Distributional net operating income was $41.9 million or 40 cents per share, up from $33.9 million or 35 cents per share in the prior-year quarter.

For 2019, net investment income of $1.41 per share outpaced the Zacks Consensus Estimate of $1.40. The bottom line grew 18.5% from the year-ago figure.

Total Investment Income & Expenses

Total investment income for the quarter was $70.6 million, up 24.1% from the year-ago quarter. The upside was mainly driven by a higher average debt investment balance and rise in income from acceleration from early loan repayments. The top line beat the Zacks Consensus Estimate of $68.9 million.

For 2019, total investment income was $267.9 million, up 28.9% year over year. The figure surpassed the Zacks Consensus Estimate of $266.2 million.

Total quarterly operating expenses jumped 15.9% year over year to $30.5 million. The increase resulted from a rise in all expense components, except for stock-based compensation costs.

Total Portfolio Value & New Commitments

The fair value of Hercules Capital’s total investment portfolio was $2.3 billion as of Dec 31, 2019.

In the reported quarter, the company provided $283.9 million in new debt and equity commitments.

Balance Sheet Position

As of Dec 31, 2019, Hercules Capital’s net asset value was $10.55 per share compared with $9.90 on Dec 31, 2018.

The company had $235.5 million in liquidity, including $64.4 million in unrestricted cash and cash equivalents, and $171.1 million in credit facilities, as of Dec 31, 2019.

At the end of the fourth quarter, the weighted average cost of debt, comprising interest and fees, was 5%, down from 5.3% from the prior-year quarter end.

Outlook

With the growth of debt investment portfolio and an increase in the average size of loans, management expects quarterly payoffs throughout 2020 to remain elevated and lumpy.

The company expects $100-150 million in prepayment activity in the first quarter of 2020.

For 2020, Hercules Capital expects core yields to be between 11.5% and 12.5%.

For first-quarter 2020, the company anticipates SG&A expenses of $15.5-$16.5 million.

Given the expectation of increase in activity and significant use of credit facilities in the first quarter, borrowing costs are projected to flare up.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Hercules Tech has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Hercules Tech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.