Earnings momentum for
KCAP Financial, Inc.
) has been strong following its second quarter results, sending
this private equity firm to a Zacks #1 Rank (Strong Buy). The stock
also hit its 52-week high on September 14. A continued improvement
in investment income should help KCAP to improve profitability in
the upcoming quarters.
In addition, a P/B multiple of just 1.2 makes this stock an
attractive pick for value investors.
Impressive Second Quarter Results
On August 8, KCAP Financial reported second quarter 2012 net
investment income per share of 23 cents, topping the Zacks
Consensus Estimate of 20 cents by 15.0% and soaring from last
year's 12 cents by 91.7%. Growth in total interest income was the
main factor behind this improvement, partially offset by higher
Net investment income of $6.0 million more than doubled from last
year. However, total expenses increased 2.9% to $3.5 million from
$3.4 million in the year-ago period, aided by higher administrative
and insurance expenses.
Earnings Estimates on an Upswing
Over the last 60 days, the Zacks Consensus Estimate for 2012
advanced 7.7% to 84 cents per share, implying year-over-year growth
of 20.0%. For 2013, the Zacks Consensus Estimate increased 16.5% to
99 cents, indicating year-over-year growth of 17.3%.
Along with a P/B multiple of 1.2, KCAP Financial has a forward P/E
ratio as low as 10.5. (A P/E ratio under 15.0 and a P/B ratio below
3.0 generally indicate value). Furthermore, the company's share
price has gained nearly 44.7% year to date.
Additionally, KCAP Financial enjoys a dividend yield of 10.9%. The
company also enhanced its quarterly dividend from 18 cents per
share to 24 cents in the second quarter of 2012. Therefore, in
addition to being a value stock, the company offers a promising
Headquartered in New York, KCAP Financial, a private equity and
venture capital firm, invests in mid market, buyouts and mezzanine
investments. With $3.4 billion of assets under management, the
company invests through senior debt, second lien debt, secured and
unsecured subordinated debt, mezzanine debt and equity. With a
market cap of about $234.4 million, KCAP Financial competes with
American Capital, Ltd. (
), among others.
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