Prospect Capital: Discounted Valuations after Fiscal 1Q18 Earnings
Prospect Capital (PSEC) has a price-to-book ratio of 0.60x on a next-12-month or NTM basis. The average of price-to-book ratio on an NTM basis for the company’s peers is 0.80x, which suggests Prospect’s discounted valuations.
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On an NTM basis, Prospect’s peers (XLF) BlackRock Capital Investment (BKCC), Capitala Finance (CPTA), and Apollo Investment (AINV) reported price-to-book ratios of 0.86x, 0.54x, and 1.01x, respectively.
Prospect Capital currently has lower valuations mainly because of a substantial fall in net income per share in fiscal 1Q18 compared to fiscal 1Q17. The company reported net income per share of $0.03 in fiscal 1Q18, compared to $0.23 in fiscal 1Q17.
Prospect Capital has also seen a decline in its net asset value or NAV per share from $9.60 in fiscal 1Q17 to $9.12 in fiscal 1Q18. However, the fall in distribution per share could also be a major reason for Prospect’s lower valuations.
Prospect Capital declared a distribution per share of $0.23 in fiscal 1Q18, compared to $0.25 in fiscal 1Q17. The company has also seen a fall in its annualized current yield from all its investments, from 10.4% in fiscal 4Q17 to 9.9% in fiscal 1Q18.
Prospect Capital has a price-to-earnings ratio of 8.03x. However, its peers (XLF) FS Investment (FSIC), Apollo Investment (AINV), and BlackRock Capital Investment (BKCC) have price-to-earnings ratios of 7.65x, 16.96x, and 24.77x, respectively.