Rising earnings estimates on the back of strong second quarter
results - including a 6.8% earnings surprise - have helped Main
Street Capital Corporation (MAIN) achieve a Zacks #1 Rank (Strong
Buy) on September 1. Moreover, this diversified investment company
has delivered positive earnings surprises for four straight
quarters with an average beat of 11.5%.
With a solid year-to-date return of 28.3%, a history of beating
quarterly earnings estimates as well as a steady dividend increase
trend, this stock offers an attractive investment opportunity.
The Rank Driver
Better-than-expected second-quarter earnings and steady
improvement in investment portfolio are the primary rank drivers
for this stock. Moreover, continued improvement in investment
income will help enhance its profitability in the upcoming
quarters.
On August 2, Main Street reported its second quarter results
with earnings per share of 47 cents, beating the Zacks Consensus
Estimate of 44 cents by 6.8% and the year ago-earnings of 41 cents
by 14.6%.
Second-quarter results were aided by impressive growth in total
investment income. Nevertheless, considerably high expenses
marginally marred the results.
Total investment income of $20.8 million surged 29.2% from the
year-ago quarter. A significant hike of 63.3% in total investment
income from non-affiliated/non-control investments was primarily
responsible for the surge.
Total expenses were $8.0 million, increasing 23.1% from $6.5
million in the prior-year quarter. Expenses shot up mainly due to
higher interest expenses and share-based compensation expenses.
The fair value of Main Street's total investment portfolio was
$790.8 million as of June 30, 2012, up 20.2% from $658.1 million as
of December 31, 2011.
Earnings Estimate Revisions
Over the last 30 days, the Zacks Consensus Estimate for 2012
increased 3.8% to $1.89 per share based on three out of five upward
estimate revisions. The current estimate implies a year-over-year
growth of 5.0%.
For 2013, four out of five estimates were revised upward over
the same time frame, lifting the Zacks Consensus Estimate by 4.8%
to $1.97 per share.
Valuation
Main Street currently trades at a forward P/E of 14.1x, in line
with the peer group average. On a price-to-book basis, the shares
are trading at 1.6x, a 45.5% premium to the peer group average of
1.1x. Given the company's strong fundamentals, the valuation looks
justified.
Main Street has a trailing 12-month return on equity (ROE) of
11.4% compared with the peer group average of 10.1%.
About the Company
Based in Houston, Texas, Main Street is mainly a principal
investment company. It specializes in equity, equity related, and
debt investments in small and lower middle market companies. Main
Street's lower and middle market companies normally have annual
revenues between $10 million and $150 million. Main Street's middle
market debt investments are focused on businesses that generally
have annual revenues of more than $150 million. Incorporated in
1997, the company mainly invests in firms based in the Southern,
South Central, and Southwestern regions of the United States. It
has a market capitalization of roughly $839.8 million.
Other Zacks #1 Rank financial stocks include TICC Capital Corp.
(TICC) Medley Capital Corporation (MCC).
Rising earnings estimates on the back of strong second quarter
results - including a 6.8% earnings surprise - have helped
Main Street Capital Corporation
(
MAIN
) achieve a Zacks #1 Rank (Strong Buy) on September 1. Moreover,
this diversified investment company has delivered positive
earnings surprises for four straight quarters with an average
beat of 11.5%.
With a solid year-to-date return of 30.2%, a history of
beating quarterly earnings estimates as well as a steady dividend
increase trend, this stock offers an attractive investment
opportunity.
The Rank Driver
Better-than-expected second-quarter earnings and steady
improvement in investment portfolio are the primary rank drivers
for this stock. Moreover, continued improvement in investment
income will help enhance its profitability in the upcoming
quarters.
On August 2, Main Street reported its second quarter results
with earnings per share of 47 cents, beating the Zacks Consensus
Estimate of 44 cents by 6.8% and the year ago-earnings of 41
cents by 14.6%.
Second-quarter results were aided by impressive growth in
total investment income. Nevertheless, considerably high expenses
marginally marred the results.
Total investment income of $20.8 million surged 29.2% from the
year-ago quarter. A significant hike of 63.3% in total investment
income from non-affiliated/non-control investments was primarily
responsible for the surge.
Total expenses were $8.0 million, increasing 23.1% from $6.5
million in the prior-year quarter. Expenses shot up mainly due to
higher interest expenses and share-based compensation
expenses.
The fair value of Main Street's total investment portfolio was
$790.8 million as of June 30, 2012, up 20.2% from $658.1 million
as of December 31, 2011.
Earnings Estimate Revisions
Over the last 30 days, the Zacks Consensus Estimate for 2012
increased 3.8% to $1.89 per share based on three out of five
upward estimate revisions. The current estimate implies a
year-over-year growth of 5.0%.
For 2013, four out of five estimates were revised upward over
the same time frame, lifting the Zacks Consensus Estimate by 4.8%
to $1.97 per share.
Valuation
Main Street currently trades at a forward P/E of 14.3x, in
line with the peer group average. On a price-to-book basis, the
shares are trading at 1.6x, a 45.5% premium to the peer group
average of 1.1x. Given the company's strong fundamentals, the
valuation looks justified.
Main Street has a trailing 12-month return on equity (ROE) of
11.4% compared with the peer group average of 10.1%.
About the Company
Based in Houston, Texas, Main Street is mainly a principal
investment company. It specializes in equity, equity related, and
debt investments in small and lower middle market companies. Main
Street's lower and middle market companies normally have annual
revenues between $10 million and $150 million. Main Street's
middle market debt investments are focused on businesses that
generally have annual revenues of more than $150 million.
Incorporated in 1997, the company mainly invests in firms based
in the Southern, South Central, and Southwestern regions of the
United States. It has a market capitalization of roughly $852.4
million.
Other Zacks #1 Rank financial stocks include
TICC Capital Corp.
(
TICC
) and
Medley Capital Corporation
(
MCC
).
MAIN STREET CAP (MAIN): Free Stock Analysis
Report
MEDLEY CAPITAL (MCC): Free Stock Analysis
Report
TICC CAPITAL CP (TICC): Free Stock Analysis
Report
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