HTGC Stock Overview
Hercules Capital, Inc. is a business development company.
+ 1 more risk
Hercules Capital Competitors
Price History & Performance
|Historical stock prices|
|Current Share Price||US$11.58|
|52 Week High||US$19.09|
|52 Week Low||US$11.41|
|1 Month Change||-17.70%|
|3 Month Change||-17.35%|
|1 Year Change||-30.41%|
|3 Year Change||-12.07%|
|5 Year Change||-8.75%|
|Change since IPO||-10.65%|
Recent News & Updates
Hercules Capital: 10% Yield, Wake Up And Smell The Cash Flow
Summary Hercules Capital is a well-run lender to high-growth companies, with a focus on technology and life sciences companies. The company has been able to grow its originations and portfolio while maintaining strong credit quality. It also pays an attractive 10% regular dividend yield, making it a very interesting income play. I love a good market sell-off as they present great opportunities to load up on well-respected dividend payers at high yields. For some investors, this may mean adding to moat-worthy names such as V.F. Corp. (VFC) or Comcast (CMCSA) at material discounts to historical valuations. For others, it may mean adding to top BDC names in tax advantaged retirement accounts, enabling a faster rate of compounding. This brings me to Hercules Capital (HTGC), which again is trading in bargain territory after it's fallen in sympathy with the rest of the market. In this article, I highlight why now may be the opportune time to pick up this quality stock before it reverts back to its mean, so let's get started. Why HTGC? Hercules Capital is just one of a handful of business development companies ("BDC") that's internally managed, and focuses on making loans and equity investments in emerging technologies and life sciences. Since its inception 19 years ago, Hercules has deployed over $15 billion in investment capital across 590 companies, and is in many cases, a lender of choice for entrepreneurs and venture capital firms seeking growth capital financing. Hercules stock has seen quite a bit of volatility in recent months, and patient investors have seen plenty of opportunities to load up at opportune prices. It appears that another opportunity has presented itself. As shown below, HTGC is now trading below both its 50- and 200-day moving averages, and carries an RSI score of 38.7, indicating that it's heading towards oversold territory. HTGC Stock Technicals (StockCharts) Meanwhile, its business is doing just fine, as it did a record $1.0 billion in originations across debt and equity investments during the second quarter, bringing the total originations to $1.66 billion during the first half. This signals strong demand for HTGC's capital, as many private companies in the tech and life sciences sectors are delaying their IPOs and M&A activity due to market volatility, thereby requiring more near- to medium-term funding. The portfolio is also well-managed, with nearly three-quarters (74%) of the debt portfolio being comprised of first lien senior secured loans, and 24% comprised of second lien loans with Hercules retaining the right to buy out the first lien holder. Hercules also enjoys a close direct relationship with its borrowers (comparing favorably to syndicated debtholders), and is often the sole lender of its borrowers. The borrowers, in turn, benefit from the wealth of experience from the Hercules management team, as they rely on their capital market expertise. Moreover, Hercules maintains a strong track record, with just 2 investments on non-accrual status representing just 0.1% of portfolio fair value. It also generates a healthy 11.5% effective yield on debt investments and has $780 million in available liquidity to fund its deal pipeline. Leverage does not appear to be an issue, as it maintains a statutory debt to equity ratio of 0.93, sitting well below the 2.0 regulatory limit. Factors that could drive HTGC's share price down including further tightening by the Federal Reserve, which could introduce more economic uncertainty. However, despite the hardline rhetoric, I believe the Federal Reserve will still try to maintain a fine line between controlling inflation and tanking the economy outright. Moreover, HTGC actually benefits from rising rates. As noted by the CEO during the recent conference call, the NII per share in Q2 would have been $0.35 had it seen the elevated rates during the entire quarter. This implies that the $0.35 regular dividend should be at least fully covered in Q3, holding all else at least equal.
Hercules Capital: 7% From An Investment Grade Bond With 4 Years To Maturity
Hercules Capital has a rare mispriced issue with a YTM of 7%. Recently reviewed credit rating. Spreads similar to the Covid Panic even though the company is rock solid. Exchange traded debt is trading close to historical spreads in contrast. Stable balance sheet ratios limited by BDC regulations. The article was first published to members of my service Trade With Beta on 8/21/2022. I will start like this: The fixed income market is a complete mess. I have been trading this market any single day for the last 14 years and the events seen in the last 2 years are just mind-blowing. Fixed income spreads are all over the place due to a total lack of liquidity. Don't take my word for granted, try to trade them and you will most likely agree. This creates a lot of opportunities for greedy short-selling day traders like me and the funny part is that it is extremely hard to capitalize on the mispricings. The income investor on the other hand is the one to profit greatly from the opportunity. There are so many mispricings that it is hard to choose what to present to the yield-hungry public so I decided to share my third largest holding at the moment of writing because it comes with a juicy 7% yield to maturity with an investment grade credit rating. The investment in question is the 9/16/2026 2.625% HTGC bond of the BDC Hercules Capital (HTGC) with a CUSIP 427096AH5. This is a regular bond that trades on the bond market and hopefully, it is easy to be found by the CUSIP number. HTGC and its debt To make the article as small as possible and straight to the point, I will concentrate mostly on spreads. These are the regular bonds issued by HTGC in the last 5 years that have 5 years term: Historical Yield Spreads Of HTGC 5-Year Notes (Author's Spreadsheet) Before the Covid Panic of 2020, HTGC was able to issue 3 5-year bonds at a maximum spread of 2.89%. Then for a while in 2020 all credit spreads widened and the company had to issue at similar nominal yields but the spreads went to as high as 4.17%. Just a year later the company was able to issue at a lower than 2% spread to the 5-year treasury. The reason behind this might be that the bond issued in September 2021 was rated by Moody's. This is a game changer in general. At the time of writing this article, the bond in question has a very large seller at 7% YTM while the 5-year treasury is at 3.10%. The spreads are back to the levels of 2020. Does this make sense is the question we are all asking ourselves? If I have to answer based on my financial understanding, I would definitely say that given all the recent financial and political data around the world, it is quite reasonable for credit spreads to widen. With this in mind, the reader has to understand that the 7% YTM of the bonds is not some once-in-a-lifetime opportunity that will make you sleep well at night and will get you as rich as Elon Musk in a year. It is very possible that the market pricing of this bond is correct. And here comes the headache. Why would anyone recommend an investment if it is fairly priced? The simple answer to that question is that nobody at the moment has any idea what part of the market is fairly priced. If we assume that HTGC bonds have widened in relation to strong financial logic we have to examine how the credit spreads are behaving in other parts of the fixed income market. Credit profile HTGC has just recently been reviewed by Fitch and received a BBB- rating. Moody's is also considering HTGC to be an investment grade issuer: HTGC Credit Rating (Moody's) The public doubts rating agencies but in entities as simple as BDC and Closed-end funds one has to be pretty sure that the analysts whose professional duty is to evaluate credibility, are most likely giving a fair assessment. The BDC structure is regulated by law and most BDCs are not even willing to leverage to the max even though they are now allowed to take more leverage compared to CEFs. Credit spreads in investment grade preferred stocks Here I have chosen to show the spreads of 3 of the largest and most significant issuers of preferred stocks BAC, FRC, and PSA: Yield Spreads (FRC, BAC, PSA) (Author's Spreadsheet) The current spreads for BAC are 0.3% lower than the average, for FRC are 0.08% lower than the average and for PSA are 0.47% lower than the average for the examined period. The picture is quite similar to any of the high-quality preferred stock. None of them at the moment has widened significantly and all of them are at least 0.4% lower compared to 2020 levels. Credit spreads in investment grade exchange-traded debt Here I have chosen the only comparable bonds and keep in mind that there is not much ETD with 5-year terms so the benchmark here is the 30-year treasury again: Baby Bond Spreads (Author's Spreadsheet) On average, any bond from the list issued in 2020 has narrowed its spread by 0.72%. So definitely the investment grade ones with longer maturity have not widened their spreads to treasuries and none of them is trading at the spreads seen in 2020. This has to mean that HTGC is as distressed as 2020 because otherwise, the current pricing of the bonds makes no sense at all. How distressed is HTGC at the moment? Just opening our favorite website to see the sentiment: HTGC Sentiment And News (Seeking Alpha) In addition to the rise in dividends and 5 out of 7 articles being a buy recommendation, I have to remind you that the public pays $14.85 to own the common stock and this is 39% above book value. Since HTGC is a simple BDC this means that the public is so certain in the alpha generated by management that the public is just fine overpaying the NAV to receive this tasty 9.43% dividend yield. There is just no way that the market consensus is to pay a 40% premium while the market consensus for the bonds is to widen the credit spread to Covid levels. Something here is totally wrong. HTGC company profile and a hypothetical proposal to management As per the last report, the company has $2.87 bln of assets with $1.54 bln of debt and $1.3bln of equity. The Assets yield is around 10%, the fees and general and administrative expenses are around 2.2% and the interest plus loan fees stand at 3.6% on debt and 1.9% of total assets. The ROE is close to 12%. If everything stands still and there is no increase in non-performing loans one can expect to generate 12% ROE from the company. When HTGC trades at a 40% premium to book value one can expect to earn 8.5% on his investment in HTGC. Most of the debt HTGC holds in its portfolio is so far away from investment grade and still, the debt of the company is investment grade. Now imagine for a second if the same management creates a simple CEF that invests in the bonds of HTGC at a 7% yield. This CEF will most likely get an A rating by any rating agency. It will be possible for the fund to finance at way lower rates. Here is a simple calculation for the management of HTGC assuming they create a term structure CEF invested in their own bond with interest expense on the term preferred A-rated preferred stock of the fund of 4% and 1% in management fees: Hypothetical CEF Invested In HTGC Notes (Author's Research)
atai Life Sciences nabs $175M in loan facility from Hercules Capital
atai Life Sciences (NASDAQ:ATAI) entered into a term loan facility for up to $175M with Hercules Capital (NYSE:HTGC). "While we continue to execute on our diversified pipeline of differentiated drug candidates, we look forward to several anticipated near-term catalysts across our key programs, including Phase 2a data of PCN-101 in treatment-resistant depression towards the end of this year," CEO and co-founder Florian Brand commented. Under the terms of the facility, $15M was drawn at closing, with an additional $20M available to be drawn at atai’s option by MaR. 15, 2023, and thereafter, an additional $25M available to be drawn at atai’s option by Dec. 15, 2023. Remaining $115M becomes available in tranches through Mar. 31, 2025. The loan facility matures 48 months from closing, which may be extended to 54 months on achievement of certain performance milestones.
|HTGC||US Capital Markets||US Market|
Return vs Industry: HTGC underperformed the US Capital Markets industry which returned -24% over the past year.
Return vs Market: HTGC underperformed the US Market which returned -21.5% over the past year.
|HTGC Average Weekly Movement||5.0%|
|Capital Markets Industry Average Movement||0.4%|
|Market Average Movement||6.9%|
|10% most volatile stocks in US Market||15.6%|
|10% least volatile stocks in US Market||2.8%|
Stable Share Price: HTGC is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.
Volatility Over Time: HTGC's weekly volatility (5%) has been stable over the past year.
About the Company
Hercules Capital, Inc. is a business development company. The firm specializing in providing venture debt, debt, senior secured loans, and growth capital to privately held venture capital-backed companies at all stages of development from startups, to expansion stage including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancing and established-stage companies. The firm provides growth capital financing solutions for capital extension; management buy-out and corporate spin-out financing solutions; company, asset specific, or intellectual property acquisition financing; convertible, subordinated and/or mezzanine loans; domestic and international corporate expansion; vendor financing; revenue acceleration by sales and marketing development, and manufacturing expansion.
Hercules Capital Fundamentals Summary
|HTGC fundamental statistics|
Is HTGC overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|HTGC income statement (TTM)|
|Cost of Revenue||US$0|
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
|Earnings per share (EPS)||0.097|
|Net Profit Margin||4.36%|
How did HTGC perform over the long term?See historical performance and comparison
17.3%Current Dividend Yield
Is HTGC undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score 3/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Key Valuation Metric
Which metric is best to use when looking at relative valuation for HTGC?
Other financial metrics that can be useful for relative valuation.
|What is HTGC's n/a Ratio?|
Price to Earnings Ratio vs Peers
How does HTGC's PE Ratio compare to its peers?
|HTGC PE Ratio vs Peers|
|Company||PE||Estimated Growth||Market Cap|
CVII Churchill Capital Corp VII
IPOF Social Capital Hedosophia Holdings VI
GCMG Grosvenor Capital Management
ASZ Austerlitz Acquisition Corporation II
HTGC Hercules Capital
Price-To-Earnings vs Peers: HTGC is expensive based on its Price-To-Earnings Ratio (119.6x) compared to the peer average (22.9x).
Price to Earnings Ratio vs Industry
How does HTGC's PE Ratio compare vs other companies in the US Capital Markets Industry?
Price-To-Earnings vs Industry: HTGC is expensive based on its Price-To-Earnings Ratio (119.6x) compared to the US Capital Markets industry average (24.7x)
Price to Earnings Ratio vs Fair Ratio
What is HTGC'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.
|Current PE Ratio||119.6x|
|Fair PE Ratio||80.4x|
Price-To-Earnings vs Fair Ratio: HTGC is expensive based on its Price-To-Earnings Ratio (119.6x) compared to the estimated Fair Price-To-Earnings Ratio (80.4x).
Share Price vs Fair Value
What is the Fair Price of HTGC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: HTGC ($11.58) is trading below our estimate of fair value ($21.89)
Significantly Below Fair Value: HTGC 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: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.
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How is Hercules Capital forecast to perform in the next 1 to 3 years based on estimates from 9 analysts?
Future Growth Score4/6
Future Growth Score 4/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: HTGC's forecast earnings growth (123.9% per year) is above the savings rate (1.9%).
Earnings vs Market: HTGC's earnings (123.9% per year) are forecast to grow faster than the US market (14.7% per year).
High Growth Earnings: HTGC's earnings are expected to grow significantly over the next 3 years.
Revenue vs Market: HTGC's revenue (15.9% per year) is forecast to grow faster than the US market (7.6% per year).
High Growth Revenue: HTGC's revenue (15.9% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: Insufficient data to determine if HTGC's Return on Equity is forecast to be high in 3 years time
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How has Hercules Capital performed over the past 5 years?
Past Performance Score1/6
Past Performance Score 1/6
Growing Profit Margin
Earnings vs Industry
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: HTGC has a large one-off loss of $140.8M impacting its June 30 2022 financial results.
Growing Profit Margin: HTGC's current net profit margins (4.4%) are lower than last year .
Past Earnings Growth Analysis
Earnings Trend: HTGC's earnings have grown by 18.3% per year over the past 5 years.
Accelerating Growth: HTGC's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.
Earnings vs Industry: HTGC had negative earnings growth (-96.4%) over the past year, making it difficult to compare to the Capital Markets industry average (33.2%).
Return on Equity
High ROE: HTGC's Return on Equity (1%) is considered low.
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How is Hercules Capital's financial position?
Financial Health Score2/6
Financial Health Score 2/6
Short Term Liabilities
Long Term Liabilities
Financial Position Analysis
Short Term Liabilities: HTGC's short term assets ($140.8M) exceed its short term liabilities ($38.6M).
Long Term Liabilities: HTGC's short term assets ($140.8M) do not cover its long term liabilities ($1.5B).
Debt to Equity History and Analysis
Debt Level: HTGC's net debt to equity ratio (104.2%) is considered high.
Reducing Debt: HTGC's debt to equity ratio has increased from 91.6% to 112.9% over the past 5 years.
Debt Coverage: HTGC's operating cash flow is negative, therefore debt is not well covered.
Interest Coverage: HTGC's interest payments on its debt are well covered by EBIT (3.7x coverage).
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What is Hercules Capital current dividend yield, its reliability and sustainability?
Dividend Score 4/6
Cash Flow Coverage
Current Dividend Yield
Dividend Yield vs Market
|Hercules Capital Dividend Yield vs Market|
|Company (Hercules Capital)||17.3%|
|Market Bottom 25% (US)||1.7%|
|Market Top 25% (US)||4.7%|
|Industry Average (Capital Markets)||3.0%|
|Analyst forecast in 3 Years (Hercules Capital)||13.2%|
Notable Dividend: HTGC's dividend (17.27%) is higher than the bottom 25% of dividend payers in the US market (1.66%).
High Dividend: HTGC's dividend (17.27%) is in the top 25% of dividend payers in the US market (4.7%)
Stability and Growth of Payments
Stable Dividend: HTGC's dividends per share have been stable in the past 10 years.
Growing Dividend: HTGC's dividend payments have increased over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: With its high payout ratio (1306.5%), HTGC's dividend payments are not well covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: HTGC is paying a dividend but the company has no free cash flows.
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How experienced are the management team and are they aligned to shareholders interests?
Average management tenure
Scott Bluestein (44 yo)
Mr. Scott Bluestein serves as Chief Executive Officer, President and Director at Hercules Capital, Inc. since July 18, 2019. He is responsible for the Hercules lending policies and risk management practice...
CEO Compensation Analysis
|Scott Bluestein's Compensation vs Hercules Capital Earnings|
|Date||Total Comp.||Salary||Company Earnings|
|Jun 30 2022||n/a||n/a|
|Mar 31 2022||n/a||n/a|
|Dec 31 2021||US$7m||US$650k|
|Sep 30 2021||n/a||n/a|
|Jun 30 2021||n/a||n/a|
|Mar 31 2021||n/a||n/a|
|Dec 31 2020||US$8m||US$650k|
|Sep 30 2020||n/a||n/a|
|Jun 30 2020||n/a||n/a|
|Mar 31 2020||n/a||n/a|
|Dec 31 2019||US$8m||US$594k|
|Sep 30 2019||n/a||n/a|
|Jun 30 2019||n/a||n/a|
|Mar 31 2019||n/a||n/a|
|Dec 31 2018||US$11m||US$515k|
|Sep 30 2018||n/a||n/a|
|Jun 30 2018||n/a||n/a|
|Mar 31 2018||n/a||n/a|
|Dec 31 2017||US$3m||US$500k|
|Sep 30 2017||n/a||n/a|
|Jun 30 2017||n/a||n/a|
|Mar 31 2017||n/a||n/a|
|Dec 31 2016||US$3m||US$433k|
|Sep 30 2016||n/a||n/a|
|Jun 30 2016||n/a||n/a|
|Mar 31 2016||n/a||n/a|
|Dec 31 2015||US$2m||US$420k|
Compensation vs Market: Scott's total compensation ($USD7.41M) is above average for companies of similar size in the US market ($USD5.59M).
Compensation vs Earnings: Scott's compensation has been consistent with company performance over the past year.
Experienced Management: HTGC's management team is seasoned and experienced (5.2 years average tenure).
Experienced Board: HTGC's board of directors are considered experienced (3.3 years average tenure).
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: HTGC insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
|19 Aug 22||BuyUS$1,266||Wade Loo||Individual||81||US$15.63|
|26 May 22||BuyUS$5,981||Christian Follmann||Individual||420||US$14.24|
|26 May 22||SellUS$5,977||Christian Follmann||Individual||420||US$14.23|
|12 May 22||BuyUS$148,800||Thomas Fallon||Individual||10,000||US$14.88|
|24 Mar 22||BuyUS$1,342||Wade Loo||Individual||75||US$17.89|
|Owner Type||Number of Shares||Ownership Percentage|
Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 9.9%.
|Ownership||Name||Shares||Current Value||Change %||Portfolio %|
Hercules Capital, Inc.'s employee growth, exchange listings and data sources
- Name: Hercules Capital, Inc.
- Ticker: HTGC
- Exchange: NYSE
- Founded: 2003
- Industry: Asset Management and Custody Banks
- Sector: Diversified Financials
- Implied Market Cap: US$1.460b
- Shares outstanding: 126.07m
- Website: https://www.htgc.com
Number of Employees
- Hercules Capital, Inc.
- 400 Hamilton Avenue
- Suite 310
- Palo Alto
- United States
|Ticker||Exchange||Primary Security||Security Type||Country||Currency||Listed on|
|HTGC||NYSE (New York Stock Exchange)||Yes||Common Stock||US||USD||Jun 2005|
|19H||DB (Deutsche Boerse AG)||Yes||Common Stock||DE||EUR||Jun 2005|
|0J4M||LSE (London Stock Exchange)||Yes||Common Stock||GB||USD||Jun 2005|
Company Analysis and Financial Data Status
|Data||Last Updated (UTC time)|
|Company Analysis||2022/09/30 00:00|
|End of Day Share Price||2022/09/30 00:00|
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.