Hercules Capital Inc. (HTGC - Free Report) is well poised for top-line growth, supported by robust loan originations and rising demand for customized financing. Also, its capital deployment policy seems impressive. Thus, it seems to be a wise idea to add the stock to your portfolio now.
Further, analysts are bullish on the stock. Over the past 30 days, the Zacks Consensus Estimate for earnings has been revised 2.9% and 2.1% upward for 2019 and 2020, respectively. It currently carries a Zacks Rank #2 (Buy).
Moreover, the company’s price performance looks impressive. The stock has rallied 27.7% so far this year, outperforming 18.5% growth recorded by the industry.
Here’s Why the Stock is a Solid Pick
Revenue strength: The company’s total investment income witnessed a five-year (2014-2018) CAGR of 9.6%. Given the improvement in economy and regulatory changes, Hercules Capital’s top line is expected to rise further.
Also, the rise in demand for customized financing will drive total new commitments in the quarters ahead. Its projected sales growth rate of 28.1% for 2019 (higher than the industry average of 3.6%) and 11% for 2020 indicates constant upward momentum in revenues.
Earnings growth: Hercules Capital witnessed earnings growth of 4.6% over the last three-five years. This uptrend is likely to continue in the near term as reflected by its projected earnings growth rate of more than 17.7% and 3.1% for 2019 and 2020, respectively.
The company recorded an average positive earnings surprise of 4.5% over the trailing four quarters.
Capital deployments: In order to maintain its RIC status, Hercules Capital distributes almost 90% of its taxable income. In May, the company hiked its quarterly dividend by 3.2%. Given a solid liquidity position, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.
Superior Return on Equity (ROE): Ares Capital’s ROE is 12.94%, higher than the industry average of 9.27%. This indicates that the company reinvests its cash more efficiently than the industry.
Other Stocks to Consider
Over the past 30 days, Hilltop Holdings (HTH - Free Report) witnessed an upward earnings estimate revision of 13% for 2019. Its share price has surged 35.5% year to date. The stock sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates of Moody's (MCO - Free Report) for 2019 have been revised 1.5% upward over the past 30 days. Its shares have jumped 61.9% so far this year. The stock carries a Zacks Rank #2.
Over the past 30 days, Ares Capital Corporation (ARCC - Free Report) 2019 earnings estimates have been revised 1.6% upward. Shares of this Zacks Rank #2 company have rallied 20.2% so far this year.
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