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Prospect Capital Beats Estimates with Investments, Lower Expenses

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Net asset value rise

Prospect Capital (PSEC) reported fiscal 2Q17 EPS (earnings per share) of $0.24 on February 8, 2017—higher than the analyst estimate of $0.22. The company improved its earnings through higher interest and other income from new investments.

Prospect’s NAV (net asset value) rose marginally from $9.60 per share on September 30, 2016, to $9.62 per share on December 31, 2016. This increase was mainly due to new investments and unrealized gains on investments. The company also benefited from lower operating expenses due to a reversal of excise tax accrued previously.

Prospect Capital’s net income rose to $100.9 million in fiscal 2Q17, compared with $81.4 million the year prior. The company reported total investment income of $183 million in fiscal 2Q17, compared with $209 million in fiscal 2Q16. Here’s how some of the company’s peers in the industry are doing:

  • Apollo Investment (AINV) beat estimates
  • BlackRock Capital Investment (BKCC) has yet to report results
  • Ares Capital (ARCC) has yet to report results
  • BlackRock (BLK) beat estimates

Together, these companies make up 1.5% of the S&P 500 SPDR ETF (SPX) (SPY).

Closed-end lender

Prospect operates as a financial services company that lends and deploys funds in middle-market and privately held companies. The company functions as a BDC (business development company). It provides funds to corporates in the form of senior and subordinated debt and equity. Investee companies then deploy capital for growth, development, acquisitions, and divestiture.

In this series, we’ll study Prospect Capital’s performance, portfolio strategy, deployments, dividends, yields, balance sheet strength, and valuation in fiscal 2Q17. Let’s begin with Prospect Capital’s yields in fiscal 2Q17.

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