Hercules Capital, Inc. HTGC is expected to continue witnessing growing demand for customized financing based on market optimism for public equities amid an improving economy. Moreover, given a solid liquidity and capital position, the company is expected to enhance shareholder value through efficient capital deployment activities.
Also, it has been witnessing upward earnings estimate revisions of late, reflecting that analysts are optimistic regarding its earnings growth potential. The Zacks Consensus Estimate for the company’s current-year earnings has been raised 2.9% over the past 60 days.
Thus, the stock currently carries a Zacks Rank #2 (Buy).
The company’s price performance also seems decent. Shares of Hercules Capital have gained 10.8% over the past six months, outperforming the industry’s growth of 5.9%.
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Looking at its growth drivers, Hercules Capital’s robust liquidity position and loan originations position it well for the future. In the first nine months of 2019, the company closed $1.19 billion of new debt and equity commitments. Driven by the rise in demand for customized financing, total new commitments are expected to increase, going forward.
Moreover, the company has a steady capital deployment plan in place. In order to maintain its RIC status, it distributes approximates 90% of its taxable income. Notably, the company announced a 3.2% hike in quarterly distribution in May 2019. Given a solid liquidity position, it will likely be able to continue enhancing shareholder value through efficient capital deployment activities.
However, higher costs remain a major concern for the company. As it undertakes efforts to improve originations, expenses will likely remain elevated, thereby hurting the bottom line to an extent. Also, the threat of concentration risk makes us apprehensive.
Other Stocks to Consider
A few other top-ranked stocks from the same space are Apollo Investment Corporation AINV, FS KKR Capital Corp. FSK and Ares Capital Corporation ARCC, all currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apollo Investment’s consensus estimate for current fiscal year earnings has been revised 7.1% upward over the past 60 days. Also, the company’s share price has rallied 12.8% over the past six months.
FS KKR Capital’s current-year earnings estimates have been revised 6.8% upward over the past 60 days. Further, the company’s shares have gained 5.3% over the past six months.
The Zacks Consensus Estimate for earnings of Ares Capital has been revised 1.6% upward for 2019 over the past 60 days. Shares of the company have gained 4.8% over the past six months.
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