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Strong liquidity, improving rate scenario and robust loan originations positions the company well for future growth. However, various concerns, including mounting expenses and the adverse impact of various regulatory restrictions make us apprehensive in the near term.
Hercules Capital’s current-year estimates witnessed two upward and two downward revisions in the last 60 days. This somewhat mixed trend is the reason for the stock carrying a Zacks Rank #3 (Hold). Notably, the Zacks Consensus Estimate for 2017 increased 1 cent in the same time period.
Going by the fundamentals, the company originated nearly $816 million of debt and equity commitments to new and existing portfolio companies in 2016. Its continued commitments to such companies position it well for loan originations in the future.
Moreover, with growing optimism for public equities, Hercules Capital remains on track to witness rising demand for customized financing from private equity firms and venture capitalists. Also, as a result of the recent Fed rate hike in mid-March, its debt investment portfolio is expected to generate $0.02 per share of additional net investment income (NII) per annum.
Further, supported by a solid liquidity position, the company continues to enhance shareholder value through efficient capital deployment activities. Notably, management intends to revisit its dividend policy at the end of second-quarter 2017, and is likely to announce a special one-time dividend.
However, continuously rising expenses remains a key concern for the company. Operating expenses rose at a CAGR of 7.5% in the last four years (2013–2016). Also, as the company continues to expand originations, expenses are expected to remain elevated in the near term.
Further, various regulatory restrictions relating to foreign investments are likely to hurt the company’s financials thereby limiting its flexibility in the capital markets. Also, concentration risk remains a concern.
Some better-ranked stocks in the finance space are Evercore Partners Inc. (EVR - Free Report) , Bank of America Corporation (BAC - Free Report) and Comerica Incorporated (CMA - Free Report) .
Evercore Partners witnessed an upward earnings estimate revision of 6% for the current year, in the last 60 days. Its share price increased 48.5% in the last six months. Evercore Partners currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Bank of America carries a Zacks Rank #2 (Buy). For the current year, in the last 60 days, its Zacks Consensus Estimate was revised 1.2% upward. The company’s share price increased 49.7% in the last six months.
Comerica also carries a Zacks Rank #2. The company witnessed an upward earnings estimate revision of 1.7% for the current year, in the last 60 days. Its share price increased nearly 40% in the last six months.
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Why it is Good to Hold Hercules Capital (HTGC) Stock Now
Hercules Capital, Inc.’s (HTGC - Free Report) shares rallied 23.9% in the last one year, outpacing the Zacks categorized Small Business Investment Companies & Commercial industry’s growth of 16.5%.
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Strong liquidity, improving rate scenario and robust loan originations positions the company well for future growth. However, various concerns, including mounting expenses and the adverse impact of various regulatory restrictions make us apprehensive in the near term.
Hercules Capital’s current-year estimates witnessed two upward and two downward revisions in the last 60 days. This somewhat mixed trend is the reason for the stock carrying a Zacks Rank #3 (Hold). Notably, the Zacks Consensus Estimate for 2017 increased 1 cent in the same time period.
Going by the fundamentals, the company originated nearly $816 million of debt and equity commitments to new and existing portfolio companies in 2016. Its continued commitments to such companies position it well for loan originations in the future.
Moreover, with growing optimism for public equities, Hercules Capital remains on track to witness rising demand for customized financing from private equity firms and venture capitalists. Also, as a result of the recent Fed rate hike in mid-March, its debt investment portfolio is expected to generate $0.02 per share of additional net investment income (NII) per annum.
Further, supported by a solid liquidity position, the company continues to enhance shareholder value through efficient capital deployment activities. Notably, management intends to revisit its dividend policy at the end of second-quarter 2017, and is likely to announce a special one-time dividend.
However, continuously rising expenses remains a key concern for the company. Operating expenses rose at a CAGR of 7.5% in the last four years (2013–2016). Also, as the company continues to expand originations, expenses are expected to remain elevated in the near term.
Further, various regulatory restrictions relating to foreign investments are likely to hurt the company’s financials thereby limiting its flexibility in the capital markets. Also, concentration risk remains a concern.
Some better-ranked stocks in the finance space are Evercore Partners Inc. (EVR - Free Report) , Bank of America Corporation (BAC - Free Report) and Comerica Incorporated (CMA - Free Report) .
Evercore Partners witnessed an upward earnings estimate revision of 6% for the current year, in the last 60 days. Its share price increased 48.5% in the last six months. Evercore Partners currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Bank of America carries a Zacks Rank #2 (Buy). For the current year, in the last 60 days, its Zacks Consensus Estimate was revised 1.2% upward. The company’s share price increased 49.7% in the last six months.
Comerica also carries a Zacks Rank #2. The company witnessed an upward earnings estimate revision of 1.7% for the current year, in the last 60 days. Its share price increased nearly 40% in the last six months.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>