Prospect Capital Corporation (NASDAQ:PSEC) posted strong fiscal fourth-quarter earnings on Monday, with an EPS beat carried by higher investment yields that drove revenues to outclass expectations. In reaction, FBR analyst Christopher Nolan reiterates an Outperform rating on PSEC, while lifting the price target from $9 to $10, which represents a nearly 16% increase from where the shares last closed.
The business development company reported EPS of $0.26, ahead of both Nolan’s and the Street’s projection of $0.25. However, Nolan points out that asset quality experienced a deterioration compared to last quarter. This comes on the heels of energy-related investment additions that in effect also amplified nonaccrual loan volumes.
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Nolan concludes, “Going forward, we are modeling for modest incremental NAV/share erosion, but we believe asset quality will remain manageable and the $1.00/share annual dividend should be secure given it is fully covered by our forward EPS outlook. PSEC also had $0.35/share in spillover income. While asset quality and valuation marks remain a persistent overhang to PSEC share price valuation multiples, we think continued steady EPS performance and a relatively steady NAV/share will enable PSEC shares to close their discount multiple discrepancy relative to peer averages.”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, one-star analyst Christopher Nolan is ranked #3,572 out of 4,129 analysts. Nolan has a 51% success rate and faces a loss of 3.5% in his annual returns. However, when recommending PSEC, Nolan gains 0.7% in average profits on the stock.
TipRanks analytics demonstrate PSEC as a Buy. 50% of the analysts polled in the last 3 months rate a Buy on PSEC, while 50% maintain a Hold. The consensus price target stands at $8.50, marking just under a 2% downside from where the stock is currently trading.