Behind Prospect Capital’s Valuations after Fiscal 2Q18 Results



Valuation multiple

Prospect Capital (PSEC) has a PE (price-to-earnings ratio) of 8.61x on a next-12-month basis compared to its peer average of 8.41x, implying Prospect’s higher valuation.

The company’s peers BlackRock Capital Investment (BKCC), FS Investment (FSIC), and Apollo Investment (AINV) have PEs of 7.53x, 9.28x, and 8.42x, respectively, on a next-12-month basis.

Prospect Capital witnessed a $0.16 rise in its NAV (net asset value) per share in fiscal 2Q18 compared to fiscal 1Q18, which could be the main reason for its higher valuations. Moreover, the company saw a rise in its net investment income per share in fiscal 2Q18 compared to the previous quarter.

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Price target

According to Prospect’s management, the company has significant opportunities to make investments. These opportunities could further improve its valuations. However, one factor that could negatively affect the Prospect’s valuations is its one-year price target.

Wall Street analysts have given PSEC a one-year estimate of $5.75, which reflects a fall of 11.5% from its current price of $6.50. The company’s repayments were higher than its originations in fiscal 2Q18, which could negatively affect its valuations.

Prospect Capital has a PE of 11.46x on a trailing-12-month basis. Its peers (XLF) BlackRock Capital Investment, FS Investment, and Apollo Investment have trailing-12-month PEs of 23.60x, 8.16x, and 16.16x, respectively.


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