Earnings estimates for
KCAP Financial, Inc.
) have been moving higher following its third quarter results,
boosting this private equity firm to a Zacks #1 Rank (Strong Buy)
status. A continued improvement in investment income should help
KCAP enhance its profitability in the upcoming quarters. This stock
appears to be an attractive value investment given its P/B multiple
of just 1.2.
Impressive Third Quarter Results
On November 8, KCAP Financial reported third quarter net investment
income per share of 25 cents, topping the Zacks Consensus Estimate
by 8.7% and the year-ago income by 38.9%. The upsurge was mainly
aided by growth in total interest income.
Net investment income of $7.1 million advanced 73.2% year over
year, aided by higher capital structuring service fees and elevated
interest from investments in debt securities. Total expenses were
$3.2 million, almost in line with the year-ago period.
Earnings Estimates on an Upswing
Over the last 60 days, the Zacks Consensus Estimate for 2012
advanced 3.6% to 87 cents per share on the back of 2 upward
revisions out of 3 total estimates, implying year-over-year growth
of 24.8%. For 2013, the Zacks Consensus Estimate increased 5.2% to
$1.02 as 1 of 3 estimates moved north, indicating year-over-year
growth of 16.4%.
Along with an attractive P/B multiple, KCAP Financial has a forward
P/E ratio as low as 10.8 (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 55.3% year to date.
KCAP Financial currently enjoys a dividend yield of 12.1%.
Additionally, the company enhanced its quarterly dividend to 28
cents from 24 cents per share in December 2012. Therefore, in
addition to being a value stock, the company offers a promising
Chart Shows Strength
KCAP Financial has witnessed strong price momentum since the third
quarter earnings release. Moreover, the company has been
continuously outperforming its 200-day moving average along with
the S&P 500 over the last six months, exhibiting a steady
growth trend. The year-to-date return for the stock is 55.3%
compared with the S&P 500's return of 12.8%.
Headquartered in New York, KCAP Financial, a private equity and
venture capital firm, focuses 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. The company
has a market cap of about $244.5 million. Bridge Capital Holdings (
) is another Zacks #1 Rank (Strong Buy) in the same sector.
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades are
about to be triggered and which of our experts has the hottest
hand. Then each week he hand-selects the most compelling trades and
serves them up to you in a new program called
KCAP FINL INC (KCAP): Free Stock Analysis
To read this article on Zacks.com click here.