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Why Should You Retain Owl Rock Capital in Your Portfolio?
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Owl Rock Capital Corporation has been an investor favorite on the back of healthy revenues and a strong portfolio.
The company concluded the first quarter of 2020 with investments in 101 portfolio companies across 27 industries. It added seven new portfolio companies in the period. It continues to seek opportunities in stable, large and recession-resistant businesses.
Its return on assets — a profitability measure — stands at 6.3%, higher than the industry's average of 3.2%. This reflects the company’s efficiency in utilizing its shareholders’ funds.
In the first quarter, total investment income was $204.7 million, up 35.2% year over year. This upside can be attributable to a strengthened investment portfolio.
Now let’s see what has been working to the stock’s advantage.
The company has been witnessing strong revenue growth since its inception in 2015. In fact, its top line saw an impressive CAGR of 195% during the 2016-2019 period. A steady rise in revenues, primarily from the company’s rapidly-growing interest income and growth strategies, is likely to pave the way for long-term growth.
Owl Rock Capital also boasts a sturdy portfolio of investments in companies consisting of several new commitments. This upside is evident from its new investment commitments’ CAGR of 127.9% during the 2016-2018 period. Although the same declined to some extent in 2019 and the first three months of 2020, respectively, the company’s commitment to new portfolio companies remains encouraging.
The company flaunts a robust capital position. Owing to its solid balance sheet, its board recently cleared a dividend for the second quarter. Its dividend yield stands at 9.8%, much higher than its industry's average of 1.8%. In the first quarter, the company’s agent Goldman, Sachs & Co. bought back shares worth $48 million under the 10b5-1 Plan.
However, Owl Rock Capital’s expenses have been rising over the last few years. Its operating expenses escalated 116% and 104% in 2018 and 2019, respectively, which is a persistent concern for us. Net operating expenses of $56 million rose 4.8% year over year due to higher management fees, performance-based incentive fees, professional fees, directors' fees, and other general and administrative costs in the opening quarter of the ongoing year. The company is likely to witness increasing costs going forward due to its investments, which in turn, might put pressure on its margins.
Shares of this Zacks Rank #3 (Hold) company have lost 12.1% in a year’s time, marginally higher than the industry's decline of 12%. This looks better than the price performance of other companies in the same space, such as, TCG BDC, Inc. (CGBD - Free Report) , On Deck Capital, Inc. and FEDNAT HOLDING CO , which have decreased 26%, 79%, 13%, respectively, over the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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Why Should You Retain Owl Rock Capital in Your Portfolio?
Owl Rock Capital Corporation has been an investor favorite on the back of healthy revenues and a strong portfolio.
The company concluded the first quarter of 2020 with investments in 101 portfolio companies across 27 industries. It added seven new portfolio companies in the period. It continues to seek opportunities in stable, large and recession-resistant businesses.
Its return on assets — a profitability measure — stands at 6.3%, higher than the industry's average of 3.2%. This reflects the company’s efficiency in utilizing its shareholders’ funds.
In the first quarter, total investment income was $204.7 million, up 35.2% year over year. This upside can be attributable to a strengthened investment portfolio.
Now let’s see what has been working to the stock’s advantage.
The company has been witnessing strong revenue growth since its inception in 2015. In fact, its top line saw an impressive CAGR of 195% during the 2016-2019 period. A steady rise in revenues, primarily from the company’s rapidly-growing interest income and growth strategies, is likely to pave the way for long-term growth.
Owl Rock Capital also boasts a sturdy portfolio of investments in companies consisting of several new commitments. This upside is evident from its new investment commitments’ CAGR of 127.9% during the 2016-2018 period. Although the same declined to some extent in 2019 and the first three months of 2020, respectively, the company’s commitment to new portfolio companies remains encouraging.
The company flaunts a robust capital position. Owing to its solid balance sheet, its board recently cleared a dividend for the second quarter. Its dividend yield stands at 9.8%, much higher than its industry's average of 1.8%. In the first quarter, the company’s agent Goldman, Sachs & Co. bought back shares worth $48 million under the 10b5-1 Plan.
However, Owl Rock Capital’s expenses have been rising over the last few years. Its operating expenses escalated 116% and 104% in 2018 and 2019, respectively, which is a persistent concern for us. Net operating expenses of $56 million rose 4.8% year over year due to higher management fees, performance-based incentive fees, professional fees, directors' fees, and other general and administrative costs in the opening quarter of the ongoing year. The company is likely to witness increasing costs going forward due to its investments, which in turn, might put pressure on its margins.
Shares of this Zacks Rank #3 (Hold) company have lost 12.1% in a year’s time, marginally higher than the industry's decline of 12%. This looks better than the price performance of other companies in the same space, such as, TCG BDC, Inc. (CGBD - Free Report) , On Deck Capital, Inc. and FEDNAT HOLDING CO , which have decreased 26%, 79%, 13%, respectively, over the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>