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Tale of the Tape

Zacks Equity Research

What Makes KCAP Financial (KCAP) a Strong Sell?
November 15, 2016

CMFN KCAP

Trades from $3

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is KCAP Financial, Inc. (KCAP - Free Report) , which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in KCAP.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 1 estimate moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to trend lower, going from 57 cents a share a month ago to its current level of 51 cents.

Also, for the current quarter, KCAP Financial has seen 1 downward estimate revision versus no revisions in the opposite direction, dragging the consensus estimate down to 13 cents a share from 15 cents over the past 30 days.  

The stock also has seen some pretty dismal trading lately, as the share price has dropped 14.6% in the past month.

KCAP FINL INC Price and Consensus

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the Finance-SBIC & Commercial industry, you may instead consider a better-ranked stock - CM Finance Inc. (CMFN - Free Report) . The stock currently holds a Zacks Rank #2 (Buy) and may be a better selection at this time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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