|
Related Topics
|
Category: Stock Market and Saratoga Investment Corp
Date: 10 October 2019 Stock Price: $24.48 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Saratoga Investment Corporation a business development company that provides customised financing solutions to medium sized firms in the United States.
|
About Saratoga Investment Corporation
Saratoga Investment Corp. (NYSE: SAR) is a publicly traded business development company (BDC) that provides customized financing solutions for middle market companies located in the United States. Saratoga’s senior investment professionals have over 200 years of combined experience investing in more than $4 billion in middle market businesses
Overview of Saratoga's latest earnings report
Data below is reported for the latest quarter unless stated otherwise
- Investment income: $13.888 million (up from $11.402 million for the same quarter of the previous year)
- Investment income increased by 21.8% over the last 12 months
- Operating expenses: $8.932 million (up from $6.258 million for the same quarter of the previous year)
- Operating expenses increased by 42.7% over the last 12 months
- Net investment income: $4.956 million (down from $5.144 million for the same quarter of the previous year)
- Net increase in net assets: $7.579 million (up from $3.124 million for the same quarter of the previous year)
- Diluted earnings per share: $0.91 (up from $0.45 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 8.333 million (up from 6.915 million for the same quarter of the previous year)
- Cash and cash equivalents: $2.846 million
- Cash and cash equivalents per share: $0.34
- Cash and cash equivalents makes up 1.39% of Saratoga's market capital
- Cash and cash equivalents makes up 0.55% of Saratoga's total assets
- Net Asset Value: $224.336 million
- Net Asset Value per share: $24.47
Saratoga's management commentary on the results and outlook
NEW YORK, Oct. 09, 2019 (GLOBE NEWSWIRE) -- Saratoga Investment Corp. (NYSE:SAR) (“Saratoga Investment” or “the Company”), a business development company, today announced financial results for its 2020 fiscal second quarter.
“The second fiscal quarter of 2020 has been important for us with many significant accomplishments”, said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “1) We received approval for a second SBIC license, providing us access to up to $175 million in additional long-term, low-cost capital in the form of SBA debentures to further enable us to support our core small business constituency; 2) Our second quarter performance metrics were also exceptionally strong with LTM return on equity of 14.3% and an increase in NAV per share of $0.41 to $24.47. Our adjusted NII per share of $0.68, taking into account our newly issued ATM shares, still over-earned our current $0.56 dividend per share, which was recently increased for the twentieth sequential quarter; 3) Our continued strong price and volume stock market performance enabled us to issue $34.1 million of equity accretively under our existing ATM program in Q2, importantly providing initial equity capitalization for this new second SBIC license; 4) Asset quality and growth were strong this quarter, with $2.6 million of net realized and unrealized gains on investments, and AUM growing by 19% to $486.9 million; and 5) with our new second SBIC license our dry powder has expanded significantly, providing us the ability to grow our AUM by a further 50% utilizing the current liquidity and committed credit facilities at our disposal.”
Michael J. Grisius, President and Chief Investment Officer, added, “This fiscal quarter has again demonstrated our ability to build AUM without sacrificing quality, as our investments grew by 19% from last quarter, while those rated in our highest category remained at 99%. We always emphasize that quarterly portfolio growth can be lumpy and is dependent on various factors, including a robust pipeline, credit quality of deal pipeline, and the level of repayments – this past quarter we benefitted from all three. We’ve accomplished this amid macroeconomic conditions and lending dynamics in the lower middle market that continue to provide headwinds, with LIBOR again decreasing this quarter. We also continue to bring new platform investments into the portfolio, with four more investments in new companies added this quarter, and two more since quarter-end. We remain confident that our experienced origination team, exceptional underwriting standards and tested investment strategy and focus will continue to steadily grow portfolio size and maintain quality over the long-term.”
NAV was $224.3 million as of August 31, 2019, an increase of $43.3 million from $180.9 million as of February 28, 2019, and an increase of $51.7 million from $172.7 million as of August 31, 2018. NAV per share was $24.47 as of August 31, 2019, compared to $24.06 as of May 31, 2019, $23.62 as of February 28, 2019, and $23.16 as of August 31, 2018.
Dividend
On August 27, 2019, Saratoga Investment announced a dividend of $0.56 per share for the fiscal quarter ended August 31, 2019, payable on September 26, 2019, to all stockholders of record at the close of business on September 13, 2019. This increase is the twentieth sequential increase to the Company’s quarterly dividends. On May 28, 2019, Saratoga Investment announced a dividend of $0.55 per share for the fiscal quarter ended May 31, 2019, payable on June 27, 2019, to all stockholders of record at the close of business on June 13, 2019. Total dividends declared for the fiscal years ended February 28, 2019, and 2018, were $2.10 per share and $1.94 per share, respectively. Shareholders have the option to receive payment of the dividend in cash or receive shares of common stock, pursuant to the Company’s DRIP.
Share Repurchase Plan
In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. During fiscal year 2017, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal years 2018 and 2019, this share repurchase plan was extended for another year at the same level of approval, currently through January 2020. As of August 31, 2019, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan. Saratoga Investment made no purchases of common stock in the open market during the three months ended August 31, 2019.
“The second fiscal quarter of 2020 has been important for us with many significant accomplishments”, said Christian L. Oberbeck, Chairman and Chief Executive Officer of Saratoga Investment. “1) We received approval for a second SBIC license, providing us access to up to $175 million in additional long-term, low-cost capital in the form of SBA debentures to further enable us to support our core small business constituency; 2) Our second quarter performance metrics were also exceptionally strong with LTM return on equity of 14.3% and an increase in NAV per share of $0.41 to $24.47. Our adjusted NII per share of $0.68, taking into account our newly issued ATM shares, still over-earned our current $0.56 dividend per share, which was recently increased for the twentieth sequential quarter; 3) Our continued strong price and volume stock market performance enabled us to issue $34.1 million of equity accretively under our existing ATM program in Q2, importantly providing initial equity capitalization for this new second SBIC license; 4) Asset quality and growth were strong this quarter, with $2.6 million of net realized and unrealized gains on investments, and AUM growing by 19% to $486.9 million; and 5) with our new second SBIC license our dry powder has expanded significantly, providing us the ability to grow our AUM by a further 50% utilizing the current liquidity and committed credit facilities at our disposal.”
Michael J. Grisius, President and Chief Investment Officer, added, “This fiscal quarter has again demonstrated our ability to build AUM without sacrificing quality, as our investments grew by 19% from last quarter, while those rated in our highest category remained at 99%. We always emphasize that quarterly portfolio growth can be lumpy and is dependent on various factors, including a robust pipeline, credit quality of deal pipeline, and the level of repayments – this past quarter we benefitted from all three. We’ve accomplished this amid macroeconomic conditions and lending dynamics in the lower middle market that continue to provide headwinds, with LIBOR again decreasing this quarter. We also continue to bring new platform investments into the portfolio, with four more investments in new companies added this quarter, and two more since quarter-end. We remain confident that our experienced origination team, exceptional underwriting standards and tested investment strategy and focus will continue to steadily grow portfolio size and maintain quality over the long-term.”
NAV was $224.3 million as of August 31, 2019, an increase of $43.3 million from $180.9 million as of February 28, 2019, and an increase of $51.7 million from $172.7 million as of August 31, 2018. NAV per share was $24.47 as of August 31, 2019, compared to $24.06 as of May 31, 2019, $23.62 as of February 28, 2019, and $23.16 as of August 31, 2018.
Dividend
On August 27, 2019, Saratoga Investment announced a dividend of $0.56 per share for the fiscal quarter ended August 31, 2019, payable on September 26, 2019, to all stockholders of record at the close of business on September 13, 2019. This increase is the twentieth sequential increase to the Company’s quarterly dividends. On May 28, 2019, Saratoga Investment announced a dividend of $0.55 per share for the fiscal quarter ended May 31, 2019, payable on June 27, 2019, to all stockholders of record at the close of business on June 13, 2019. Total dividends declared for the fiscal years ended February 28, 2019, and 2018, were $2.10 per share and $1.94 per share, respectively. Shareholders have the option to receive payment of the dividend in cash or receive shares of common stock, pursuant to the Company’s DRIP.
Share Repurchase Plan
In fiscal year 2015, the Company announced the approval of an open market share repurchase plan that allows it to repurchase up to 200,000 shares of its common stock at prices below its NAV as reported in its then most recently published financial statements. During fiscal year 2017, the share repurchase plan was increased to 600,000 shares of common stock, and during fiscal years 2018 and 2019, this share repurchase plan was extended for another year at the same level of approval, currently through January 2020. As of August 31, 2019, the Company purchased 218,491 shares of common stock, at the average price of $16.87 for approximately $3.7 million pursuant to this repurchase plan. Saratoga Investment made no purchases of common stock in the open market during the three months ended August 31, 2019.
Saratoga Investment Corporation (NYSE: SAR) stock price history
The image below, obtained from Google, shows the stock price history of Saratoga Investment Corp over the last 5 years. And it's been pretty decent time for Saratoga Investment Corp stockholders. 5 years ago it was trading at around $15.50 and its currently trading at around $24.48 a stock. That's a return of 57.9% provided to Saratoga Investment Corp stockholders over the last 5 years. While the return provided is pretty decent the opportunity cost of holding Saratoga Investment Corp stock that made 57.9% over the last 5 years compared to holding Netflix for example that made over 300% becomes very significant. The stock of Saratoga Investment Corp is trading at a lot closer to its 52 week high of $25.80 than it is to its 52 week low of $18.60 which to us is a clear indication that the short term sentiment and momentum of Saratoga Investment Corp's stock is fairly positive at this point in time.
Recent coverage of Saratoga Investment Corporation
The extract below discusses Saratoga's latest earnings report as obtained from Zacks
Saratoga Investment (SAR - Free Report) came out with quarterly earnings of $0.68 per share, beating the Zacks Consensus Estimate of $0.60 per share. This compares to earnings of $0.69 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 13.33%. A quarter ago, it was expected that this business development company would post earnings of $0.57 per share when it actually produced earnings of $0.60, delivering a surprise of 5.26%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. Saratoga Investment, which belongs to the Zacks Financial - SBIC & Commercial Industry industry, posted revenues of $13.89 million for the quarter ended August 2019, surpassing the Zacks Consensus Estimate by 9.57%. This compares to year-ago revenues of $11.40 million. The company has topped consensus revenue estimates four times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Saratoga Investment shares have added about 22.4% since the beginning of the year versus the S&P 500's gain of 15.4%
Read the full article here
Saratoga Investment (SAR - Free Report) came out with quarterly earnings of $0.68 per share, beating the Zacks Consensus Estimate of $0.60 per share. This compares to earnings of $0.69 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 13.33%. A quarter ago, it was expected that this business development company would post earnings of $0.57 per share when it actually produced earnings of $0.60, delivering a surprise of 5.26%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. Saratoga Investment, which belongs to the Zacks Financial - SBIC & Commercial Industry industry, posted revenues of $13.89 million for the quarter ended August 2019, surpassing the Zacks Consensus Estimate by 9.57%. This compares to year-ago revenues of $11.40 million. The company has topped consensus revenue estimates four times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Saratoga Investment shares have added about 22.4% since the beginning of the year versus the S&P 500's gain of 15.4%
Read the full article here
Saratoga Investment Corporation (NYSE: SAR) latest stock valuation
So what is Saratoga Investment Corporation's stock worth based on the release of their latest earnings report? Well for investment holding companies such as Saratoga the main variable to look at when calculating the value of the group is not earnings per share or cash generated per share or dividends declared as one would use in regular valuation models, but rather the group's stated Net Asset Value per share. The value each stockholder would get i they sold all their assets, paid all liabilities and distributed what is left equally amongst stockholders.
Based on Saratoga's latest earnings report provided their stated Net Asset Value is $24.47 a Saratoga stock. We therefore believe that the stock is fully valued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $24.47. Therefore we see a good entry point into Saratoga's stock at $22 or below. We expect the stock of Saratoga to continue trading at relatively close to its stated net asset value per share in coming weeks and months. We therefore rate the stock as a hold.
Based on Saratoga's latest earnings report provided their stated Net Asset Value is $24.47 a Saratoga stock. We therefore believe that the stock is fully valued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $24.47. Therefore we see a good entry point into Saratoga's stock at $22 or below. We expect the stock of Saratoga to continue trading at relatively close to its stated net asset value per share in coming weeks and months. We therefore rate the stock as a hold.