Hercules Capital, Inc. HTGC remains well-positioned to grow in the future supported by its increasing loan originations. Moreover, given a solid liquidity and capital position, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.
However, mounting expenses are expected to hurt bottom-line growth. Also, concentration risk remains a major concern.
The company’s price performance has also not been very encouraging. The stock has lost 7.1% in a year versus the industry’s marginal growth of 0.6%.
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Also, the Zacks Consensus Estimate for current-year earnings has remained stable over the last 30 days. Thus, the stock carries a Zacks Rank #3 (Hold).
Looking at the growth drivers, Hercules Capital’s robust liquidity position and loan originations position it well for the future. In the first nine months of 2017, the company originated nearly $552 million of debt and equity commitments to new and existing portfolio companies. Moreover, with the improving economic conditions, the company is likely to witness increased demand for financing from private equity firms and venture capitalists in the near term.
Further, Hercules Capital’s steady capital deployment activities continue to enhance investors’ confidence. Back in 2009, its board of directors adopted a policy to distribute four quarterly dividends of approximately 90-100% of the company’s taxable income. Also, management revisits its dividend policy at the end of every quarter in order to ensure if any special dividend needs to be paid or not.
However, increasing operating expenses remain a matter of concern for the company. Costs have risen at a CAGR of 7.5% over the last four years (ended 2016). Continued increase in compensation costs is mainly attributable to this escalation. Also, the company’s aim to expand originations is likely to keep expenses on the higher side in the near term.
Stocks to Consider
Some better-ranked stocks in the finance space are Lazard Ltd. LAZ, Ameriprise Financial Inc. AMP and Federated Investors, Inc. FII, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lazard’s consensus estimate for current-year earnings has been revised 3.8% upward for 2017, in the past 60 days. Also, the company’s share price has rallied 22.3% in the past 12 months.
Ameriprise Financial’s current-year earnings estimates have been moved 6% north over the past 60 days. Further, the company’s shares have jumped 53.4% in a year.
The Zacks Consensus Estimate for Federated Investors for the current year has been raised 3.4% upward over the last 60 days. Shares of the company have gained 29% in the past year.
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