Prospect Capital (NASDAQ:PSEC)’s PSEC first-quarter fiscal 2021 (ended Sep 30, 2020) net investment income of 15 cents per share lagged the Zacks Consensus Estimate of 18 cents. Also, the bottom line decreased 21.1% year over year.
Results were primarily hurt by a decline in total investment income, partly offset by lower expenses. Nevertheless, overall portfolio activity remained decent in the reported quarter with strong originations. Also, the balance sheet position remained solid.
Net investment income came in at $57.5 million, down 19% from the prior-year quarter.
Total Investment Income & Expenses Decline
Total investment income was $142.9 million, down 11.7% year over year. The fall resulted from a decline in all three components of revenues. The top-line figure missed the Zacks Consensus Estimate of $153.1 million.
Total operating expenses fell 6% from the prior-year quarter to $85.3 million.
Total Portfolio Value & Originations Decent
The fair value of Prospect Capital’s total investment portfolio was $5.4 billion as of Sep 30, 2020, up 2.9% from the previous quarter.
In the reported quarter, the company originated $177.1 million of new and follow-on investments.
Balance Sheet Strong
As of Sep 30, 2020, Prospect Capital’s net asset value was $8.40 per share compared with $8.18 on Jun 30, 2020. Further, the company had $3.9 billion of unencumbered assets as of the same date.
At the end of the reported quarter, net of cash debt to equity ratio was 69.8%, slightly up from 69.6% as of Jun 30, 2020.
Our Take
Higher expenses are expected to hurt Prospect Capital’s bottom line to an extent in the near term. Nevertheless, its loan origination activity continues to be on track. Also, the company strategically deploys capital while maintaining a balanced and diversified approach across various industries and sectors.
Currently, Prospect Capital carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Stocks
Hercules Capital (NYSE:HTGC) Inc.’s HTGC third-quarter 2020 (ended Sep 30) net investment income of 34 cents per share surpassed the Zacks Consensus Estimate of 32 cents. However, the bottom line declined 8.1% from the year-ago quarter’s reported figure.
Ares Capital Corporation’s ARCC third-quarter 2020 (ended Sep 30) core earnings of 39 cents per share beat the Zacks Consensus Estimate by a penny. However, the bottom line declined 18.8% year over year.
TriplePoint Venture Growth (NYSE:TPVG) BDC Corp.’s TPVG third-quarter 2020 (ended Sep 30) net investment income of 40 cents per share outpaced the Zacks Consensus Estimate of 36 cents. Also, the bottom line improved 38% from the year-ago quarter.
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