Positive earnings momentum on the back of strong second quarter
results - including an earnings surprise of 16.1% - helped
Solar Senior Capital Ltd.
) achieve a Zacks #1 Rank (Strong Buy) on September 20. Moreover,
this investment management company has increased dividend for the
third consecutive month in September.
REPUBLIC FST BC (FRBK): Free Stock Analysis
SOLAR SENIOR CP (SUNS): Free Stock Analysis
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With a solid year-to-date return of 21.5% and a decent dividend
yield of 7.8%, this stock offers an attractive investment
The Rank Driver
Better-than-expected second quarter earnings, consecutive dividend
increases and decent interest income growth are the primary rank
drivers for this stock.
Solar Senior Capital reported its second quarter results on July 31
with net investment income per share of 36 cents, beating the Zacks
Consensus Estimate of 31 cents by 16.1% and increasing more than
four times from the year-ago income of 8 cents. Robust results for
the reported quarter were primarily aided by elevated investment
income aided by higher interest earned on investment portfolio.
Net investment income increased significantly to $3.4 million from
$0.8 million in the year-ago quarter. However, on the downside,
total expense escalated significantly on a year-over-year basis to
$3.4 million. Elevated investment advisory and management fees,
higher performance-based incentive fees and increased
administrative service fees primarily led to the overall rise in
Recently, Solar Senior Capital declared an increased dividend of
11.75 cents per share for the month of September 2012, indicating
an augmentation of 2.2% compared with the prior month. The dividend
will be paid on October 2, 2012 to stockholders of record on
September 20, 2012. This indicates the company's third consecutive
increase since July 2012.
The Zacks Consensus Estimate for 2012 increased 4.7% to $1.35 per
share over the last 60 days. The current estimate implies a
year-over-year growth of 351.1%. For 2013, over the same time
frame, the Zacks Consensus Estimate surged 5.0% to $1.48 per share,
indicating a year-over-year growth of 9.6%.
Solar Senior Capital currently trades at a forward P/E of 13.4x, a
5.5% premium to the peer group average of 12.7x. On a price-to-book
basis, the shares are trading at 1.0x, an 11.1% premium to the peer
group average of 0.9x. Given the company's strong fundamentals, the
valuation looks reasonable.
Solar Senior Capital has a trailing 12-month ROE of 4.6% compared
with the peer group average of 6.5%.
About the Company
Headquartered in Maryland, Solar Senior Capital is an investment
management company elected to be treated as a business development
company under the Investment Company Act of 1940. It invests mainly
in leveraged, middle-market companies in the form of senior secured
loans, including first lien, unitranche and second lien debt
instruments. The company, which was incorporated in 2010, has a
market capitalization of roughly $172.1 million.
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) is also a Zacks #1 Rank bank stock.