| Snowflake Score | |
|---|---|
| Valuation | 4/6 |
| Future Growth | 0/6 |
| Past Performance | 1/6 |
| Financial Health | 2/6 |
| Dividends | 3/6 |
PSEC Stock Overview
Prospect Capital Corporation is a business development company.
Prospect Capital Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$6.77 |
| 52 Week High | US$9.06 |
| 52 Week Low | US$6.66 |
| Beta | 0.86 |
| 1 Month Change | -16.42% |
| 3 Month Change | -4.92% |
| 1 Year Change | -15.16% |
| 3 Year Change | 1.96% |
| 5 Year Change | 0.74% |
| Change since IPO | -54.87% |
Recent News & Updates
Prospect Capital exceeds $1B preferred fundraising milestone and upsizes extended credit facility to $1.584B
Prospect Capital Corporation (NASDAQ:PSEC) announced on Friday that Prospect’s preferred stock offerings have exceeded $1B in aggregate liquidation preference issuances since the initial closing in the quarter ending December 31, 2020. The ongoing offering of the Series A1, M1, and M2 Preferred Stock being raised in the private wealth, institutional, and Registered Investment Advisor channels has approximately $645M now available for sale. The company entered into an extension and upsizing of the revolving credit facility for Prospect Capital Funding LLC which will become effective on September 15, 2022. The company extended the term five years and the revolving period four years from such effective date, changes the interest rate on drawn amounts from one-month LIBOR plus 2.05% to one-month Term SOFR plus 2.05% and increases the accordion feature, which allows the Facility, at Prospect's discretion, to accept additional commitments for up to a total of $2B of commitments. Credit facility has been upsized from $1.5B of commitments from 43 lenders to $1.584B of commitments from 44 lenders. After extension effect, the facility will mature on September 15, 2027 and will include a revolving period that extends through September 15, 2026, followed by an additional one-year amortization period.
Prospect Capital NII EPS of $0.21 beats by $0.03, total Investment Income of $184.62M beats by $8.02M
Prospect Capital press release (NASDAQ:PSEC): Q4 NII EPS of $0.21 beats by $0.03. Total Investment Income of $184.62M (+17.3% Y/Y) beats by $8.02M. Shares +0.13% AH.
The Best Way To Invest In Prospect Capital
The bond market crash has driven many bargains, especially for investment grade bonds. Prospect Capital has many investment grade bonds with annual yields/returns between 4.1% (7 months) and 7.6% (6 years). This article provides historical "interest expense" and "asset coverage" ratios for PSEC and compares to the BDCs covered in the previous articles. PSEC common shares are likely overpriced, driving a yield of only 8.9% (below the average BDC). However, the bonds might be appropriate, especially considering they have relatively higher yields for similar durations, as shown below. The BDC sector is highly regulated with plenty of protections for investors, especially bondholders, as discussed below. Quick Introduction To Business Development Companies ("BDCs") Business development companies ("BDCs") invest shareholder capital in privately owned, small- and medium-sized U.S. companies. BDCs aim to generate income and capital gains when the companies they invest in are sold, much like venture capital or private equity funds. Anyone can invest in BDCs, as they are public companies traded on major stock exchanges. BDC Buzz Investment Grade BDC Bonds/Notes Many BDCs have investment grade ("IG") bonds/notes for lower-risk investors that do not mind lower yields/returns. Thanks to the recent declines in fixed income, the traditional bond market is now offering some excellent values, especially in the BDC sector, and I will discuss over the coming weeks. However, many of these bonds are now rebounding and I have started making purchases of mid duration maturities, which for me is between 3 and 6 years. This article discusses Prospect Capital (PSEC) and many of its bonds, including its 2028 bond, which is currently priced at $79.67, implying a value of $796.70 for each bond. For more information on examples of how to trade bonds using CUSIPs and limit orders, please see the article linked below. Most BDC bonds (including PSEC) have credit ratings from Moody's and/or S&P and so far, no BDC has ever defaulted for the reasons discussed in: Recession Proofing With Investment Grade Bonds As shown below, BDCs are highly regulated with plenty of protections for investors in the common stock and debt obligations, such as the amount of leverage (asset coverage ratios discussed later), asset diversification, and having a portfolio that can "generate sufficient cash flows to pay interest as well as dividends to equity investors junior to debt holders". The following is from PSEC's investor presentation: PSEC Prospect Capital's Investment Grade Bonds PSEC has many investment grade notes (including CUSIPs: 74348TAJ1, 74348TAS1, 74348TAT9, 74348TAU6, 74348TAV4, and 74348TAW2) with annual yields/returns between 4.1% (7 months) and 7.6% (6 years). These bonds are rated investment grade by S&P, Moody's, Kroll, DBRS, and Egan Jones: PSEC As discussed in the previously linked article, the "Asset Coverage Ratio" is a financial metric that measures how well a company can repay its debts by selling or liquidating its assets. The higher the asset coverage ratio, the more times a company can cover its debt. Therefore, a company with a high asset coverage ratio is considered less risky than a company with a low asset coverage ratio. BDCs are required to maintain minimum asset coverage of 150% providing strong protection to bondholders, which is one of the reasons that no publicly traded BDC has ever filed for bankruptcy nor defaulted on bond holders in the history of the sector. PSEC has not reported June 30, 2022, results. As of March 31, 2022, PSEC's asset coverage ratio was 230% which is considered higher-than-average as discussed at the end of this article. BDC Buzz It's interesting to note that the company typically does not include its convertible preferred when calculating leverage and counts as "equity": PSEC On July 11, 2022, PSEC announced that its preferred stock offerings exceeded $800 million in aggregate liquidation preference issuances. For common shareholders, the perpetual preferred shares create additional risks as the preferred is cumulative and has to be paid in full before common stock shareholders receive their distributions. The preferred stockholders have the option to convert into common at any time (at prices below NAV). Also, PSEC could redeem these shares at “any time” by converting into common stock based on the most recent five-day trading price. This could be another way for management to issue additional shares below NAV. Also, management is actively issuing these preferred shares and currently does not include the dividends paid on these when calculating adjusted earnings for press releases, as discussed next. The "Interest Expense Coverage" ratio is used to see how well a company can pay the interest on outstanding debt. Also called the times-interest-earned ratio, this ratio is used by creditors and prospective lenders to assess the risk of lending capital to a firm. A higher coverage ratio is better, although the ideal ratio may vary by industry. When a company's interest coverage ratio is only 1.5 times or lower, its ability to meet interest expenses may be questionable. PSEC's interest expense coverage ratio has historically averaged around 3.0 times, as shown below: BDC Buzz Each quarter, PSEC announces net investment income (“NII”) which does not include the convertible preferred stock dividend. However, this has been accounted for in the ratios provided above. After taking this into account, the adjusted NII is now around 11% lower. I am pointing this out because this discrepancy will continue to grow larger as the company issues additional preferred stock. This was discussed on a previous call: Q. “Has there been any internal discussions regarding maybe an adjusted NII figure that takes out the preferred dividend again, given that it's recurring and impacts common shareholder dividend coverage.” A. “Sure. It's a great question. It's something we have an active dialogue about. It's fairly simple arithmetic to the preferred interest rate, which is another item shown on the income statement. But it's something we'll keep talking about.” Source: PSEC Investor Call I will continue to add each BDC to the following table comparing to PSEC to ARCC and MAIN which were discussed in the previous articles: Ares Capital: 9% Stock Yield Or 6% For Its IG Bonds Fixed 6.5% Return On Main Street's Investment Grade Bond Please see below for discussion of PSEC's "Portfolio Quality". BDC Buzz Current Yields For Common Stock and Bonds PSEC is currently paying a monthly dividend of $0.06 or $0.72 annually, which is a yield of 8.9%. The following table shows the current annual dividends divided by NAV per share as a simple proxy for current returns on equity ("ROE") to shareholders. BDCs with higher risk should be able to deliver higher returns through increased portfolio yields. Conversely, lower-risk BDCs have lower portfolio yields due to safer assets/investments, which is why many of the safer BDCs have lower return ratios. However, many of the other BDCs with lower return ratios are due to higher operating costs (including PSEC) and/or credit issues driving lower prices paid by investors. It should also be noted that I think PSEC management uses aggressive valuations for some of its equity investments, as discussed later, and is partially responsible for having a lower payout ratio relative to its inflated NAV per share. BDC Buzz PSEC's 2028 bond was trading around 77 on July 20, 2022, and is now almost 80 but still yielding over 7.6% (as of August 18, 2022). It is important to note that is a 4% gain (from 77 to 80) and you are still getting a yield-to-maturity of over 7.6% for new purchases: FINRA FINRA FINRA The following chart is from the BDC Google Sheets showing PSEC's bonds and I will continue to cover many other BDCs listed below, including their asset and interest expense coverage ratios. It is interesting to note that many of PSEC's bonds are currently at relatively higher yields for similar maturities and likely related to having a lower quality portfolio as discussed next. BDC Google Sheets PSEC Portfolio Credit Quality I consider PSEC to have a higher risk portfolio mostly related to its aggressive valuation policies driving continued unrealized appreciation related to the same control/affiliate investments as previous quarters (National Property REIT during the previously reported quarter - March 31, 2022).
Shareholder Returns
| PSEC | US Capital Markets | US Market | |
|---|---|---|---|
| 7D | -7.9% | -6.0% | -5.2% |
| 1Y | -15.2% | -25.7% | -23.0% |
Return vs Industry: PSEC exceeded the US Capital Markets industry which returned -25.7% over the past year.
Return vs Market: PSEC exceeded the US Market which returned -23.1% over the past year.
Price Volatility
| PSEC volatility | |
|---|---|
| PSEC Average Weekly Movement | 3.6% |
| Capital Markets Industry Average Movement | 0.5% |
| Market Average Movement | 6.9% |
| 10% most volatile stocks in US Market | 15.8% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: PSEC is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.
Volatility Over Time: PSEC's weekly volatility (4%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 2004 | n/a | John Barry | https://www.prospectstreet.com |
Prospect Capital Corporation is a business development company. It specializes in middle market, mature, mezzanine finance, later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development, capital expenditures and subordinated debt tranches of collateralized loan obligations, cash flow term loans, market place lending and bridge transactions. It also makes real estate investments particularly in multi-family residential real estate asset class.
Prospect Capital Fundamentals Summary
| PSEC fundamental statistics | |
|---|---|
| Market Cap | US$2.67b |
| Earnings (TTM) | US$556.65m |
| Revenue (TTM) | US$710.90m |
4.8x
P/E Ratio3.8x
P/S RatioIs PSEC overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| PSEC income statement (TTM) | |
|---|---|
| Revenue | US$710.90m |
| Cost of Revenue | US$0 |
| Gross Profit | US$710.90m |
| Other Expenses | US$154.26m |
| Earnings | US$556.65m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 1.41 |
| Gross Margin | 100.00% |
| Net Profit Margin | 78.30% |
| Debt/Equity Ratio | 56.9% |
How did PSEC perform over the long term?
See historical performance and comparisonDividends
10.6%
Current Dividend Yield51%
Payout RatioDoes PSEC pay a reliable dividends?
See PSEC dividend history and benchmarks| Prospect Capital dividend dates | |
|---|---|
| Ex Dividend Date | Sep 27 2022 |
| Dividend Pay Date | Oct 20 2022 |
| Days until Ex dividend | 2 days |
| Days until Dividend pay date | 25 days |
Does PSEC pay a reliable dividends?
See PSEC dividend history and benchmarksValuation
Is PSEC undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
4/6Valuation Score 4/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast
Key Valuation Metric
Which metric is best to use when looking at relative valuation for PSEC?
Other financial metrics that can be useful for relative valuation.
| What is PSEC's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$2.67b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 8.5x |
| Enterprise Value/EBITDA | n/a |
| PEG Ratio | -0.2x |
Price to Earnings Ratio vs Peers
How does PSEC's PE Ratio compare to its peers?
| PSEC PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | n/a | ||
PSEC Prospect Capital | 4.8x | -29.7% | US$2.7b |
Price-To-Earnings vs Peers: Insufficient data to calculate PSEC's Price-To-Earnings Ratio vs. peers for valuation analysis.
Price to Earnings Ratio vs Industry
How does PSEC's PE Ratio compare vs other companies in the US Capital Markets Industry?
Price-To-Earnings vs Industry: PSEC is good value based on its Price-To-Earnings Ratio (4.8x) compared to the US Capital Markets industry average (25x)
Price to Earnings Ratio vs Fair Ratio
What is PSEC's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 4.8x |
| Fair PE Ratio | 7x |
Price-To-Earnings vs Fair Ratio: PSEC is good value based on its Price-To-Earnings Ratio (4.8x) compared to the estimated Fair Price-To-Earnings Ratio (7x).
Share Price vs Fair Value
What is the Fair Price of PSEC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: PSEC ($6.77) is trading below our estimate of fair value ($19.93)
Significantly Below Fair Value: PSEC is trading below fair value by more than 20%.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Insufficient data to show price forecast.
Discover undervalued companies
Future Growth
How is Prospect Capital forecast to perform in the next 1 to 3 years based on estimates from 2 analysts?
Future Growth Score
0/6Future Growth Score 0/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
-29.7%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: PSEC's earnings are forecast to decline over the next 3 years (-29.7% per year).
Earnings vs Market: PSEC's earnings are forecast to decline over the next 3 years (-29.7% per year).
High Growth Earnings: PSEC's earnings are forecast to decline over the next 3 years.
Revenue vs Market: PSEC's revenue (5.4% per year) is forecast to grow slower than the US market (7.6% per year).
High Growth Revenue: PSEC's revenue (5.4% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: PSEC's Return on Equity is forecast to be low in 3 years time (9%).
Past Performance
How has Prospect Capital performed over the past 5 years?
Past Performance Score
1/6Past Performance Score 1/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
35.9%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: PSEC has a large one-off gain of $240.1M impacting its June 30 2022 financial results.
Growing Profit Margin: PSEC's current net profit margins (78.3%) are lower than last year .
Past Earnings Growth Analysis
Earnings Trend: PSEC's earnings have grown significantly by 35.9% per year over the past 5 years.
Accelerating Growth: PSEC's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.
Earnings vs Industry: PSEC had negative earnings growth (-42.1%) over the past year, making it difficult to compare to the Capital Markets industry average (33.2%).
Return on Equity
High ROE: PSEC's Return on Equity (12.1%) is considered low.
Financial Health
How is Prospect Capital's financial position?
Financial Health Score
2/6Financial Health Score 2/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: PSEC's short term assets ($50.1M) do not cover its short term liabilities ($114.0M).
Long Term Liabilities: PSEC's short term assets ($50.1M) do not cover its long term liabilities ($2.7B).
Debt to Equity History and Analysis
Debt Level: PSEC's net debt to equity ratio (56.2%) is considered high.
Reducing Debt: PSEC's debt to equity ratio has reduced from 78.8% to 56.9% over the past 5 years.
Debt Coverage: PSEC's operating cash flow is negative, therefore debt is not well covered.
Interest Coverage: PSEC's interest payments on its debt are well covered by EBIT (4.1x coverage).
Balance Sheet
Dividend
What is Prospect Capital current dividend yield, its reliability and sustainability?
Dividend Score
3/6Dividend Score 3/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
10.64%
Current Dividend Yield
Upcoming Dividend Payment
Dividend Yield vs Market
Notable Dividend: PSEC's dividend (10.64%) is higher than the bottom 25% of dividend payers in the US market (1.65%).
High Dividend: PSEC's dividend (10.64%) is in the top 25% of dividend payers in the US market (4.57%)
Stability and Growth of Payments
Stable Dividend: PSEC's dividend payments have been volatile in the past 10 years.
Growing Dividend: PSEC's dividend payments have fallen over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: With its reasonable payout ratio (50.5%), PSEC's dividend payments are covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: PSEC is paying a dividend but the company has no free cash flows.
Management
How experienced are the management team and are they aligned to shareholders interests?
11.4yrs
Average management tenure
CEO
John Barry (70 yo)
18.42yrs
Tenure
Mr. John Francis Barry, III, J.D. serves as Chairman of the Board and Chief Executive Officer of Pathway Capital Opportunity Fund Management, LLC. & Prospect Capital Corporation. He serves as the Chief Exe...
Leadership Team
Experienced Management: PSEC's management team is seasoned and experienced (11.4 years average tenure).
Board Members
Experienced Board: PSEC's board of directors are seasoned and experienced ( 14 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: PSEC insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
| Date | Value | Name | Entity | Role | Shares | Max Price |
|---|---|---|---|---|---|---|
| 07 Sep 22 | BuyUS$19,478 | Kristin Lea Dask | Individual | 2,650 | US$7.35 | |
| 07 Sep 22 | BuyUS$14,700 | Eugene Stark | Individual | 2,000 | US$7.35 |
Ownership Breakdown
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
Top Shareholders
| Ownership | Name | Shares | Current Value | Change % | Portfolio % | |
|---|---|---|---|---|---|---|
| 79,450,383 | $537.9m | 0.06% | no data | |||
| 27,189,452 | $184.1m | 0% | no data | |||
| 3,431,123 | $23.2m | -12.78% | 0.05% | |||
| 2,349,916 | $15.9m | 9.08% | no data | |||
| 2,070,917 | $14.0m | 12.81% | no data | |||
| 1,842,602 | $12.5m | -0.29% | 0.03% | |||
| 1,529,380 | $10.4m | 0% | no data | |||
| 1,401,418 | $9.5m | -0.12% | no data | |||
| 1,233,100 | $8.3m | -8.45% | 0.02% | |||
| 865,497 | $5.9m | -4.48% | no data | |||
| 865,497 | $5.9m | -4.48% | 3.99% | |||
| 831,564 | $5.6m | -0.36% | 0.02% | |||
| 773,400 | $5.2m | -3.64% | no data | |||
| 739,993 | $5.0m | 3.21% | 0.01% | |||
| 687,015 | $4.7m | -3.5% | 0.09% | |||
| 590,348 | $4.0m | 9.81% | 0.01% | |||
| 563,173 | $3.8m | 42.48% | 0.02% | |||
| 560,830 | $3.8m | 0.52% | 0.49% | |||
| 394,742 | $2.7m | -0.11% | 0.01% | |||
| 361,726 | $2.4m | 9.58% | no data | |||
| 327,752 | $2.2m | 9.02% | no data | |||
| 268,908 | $1.8m | 28.13% | 0.02% | |||
| 254,712 | $1.7m | 4.59% | 0.02% | |||
| 252,558 | $1.7m | 0.89% | 0.32% | |||
| 236,118 | $1.6m | 149.91% | no data |
Company Information
Prospect Capital Corporation's employee growth, exchange listings and data sources
Key Information
- Name: Prospect Capital Corporation
- Ticker: PSEC
- Exchange: NasdaqGS
- Founded: 2004
- Industry: Asset Management and Custody Banks
- Sector: Diversified Financials
- Implied Market Cap: US$2.673b
- Shares outstanding: 394.80m
- Website: https://www.prospectstreet.com
Location
- Prospect Capital Corporation
- 10 East 40th Street
- 42nd Floor
- New York
- New York
- 10016
- United States
Listings
| Ticker | Exchange | Primary Security | Security Type | Country | Currency | Listed on |
|---|---|---|---|---|---|---|
| PSEC | NasdaqGS (Nasdaq Global Select) | Yes | Common Stock | US | USD | Jul 2004 |
| RK8 | DB (Deutsche Boerse AG) | Yes | Common Stock | DE | EUR | Jul 2004 |
| 0R25 | LSE (London Stock Exchange) | Yes | Common Stock | GB | USD | Jul 2004 |
| PSEC.PRA | NYSE (New York Stock Exchange) | 5.35% CUM PFD A | US | USD | Jul 2021 |
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/09/24 00:00 |
| End of Day Share Price | 2022/09/23 00:00 |
| Earnings | 2022/06/30 |
| Annual Earnings | 2022/06/30 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.