Fifth Street Finance Corp. (FSC) Stock Rating Reaffirmed by National Securities
Fifth Street Finance Corp. (NASDAQ:FSC)‘s stock had its “neutral” rating reiterated by analysts at National Securities in a research report issued to clients and investors on Thursday. They presently have a $6.00 price target on the stock. National Securities’ price objective would suggest a potential upside of 11.73% from the company’s current price.
The analysts wrote, “• NAV/share decreased 2% Q/Q to $7.97 as non-accruals at amortized cost increased to $214.8 million from $106.4 million the quarter prior.
• NII/share of $0.18 matched consensus estimates but fell short of our estimate of $0.20/share. The miss was largely attributable to lower investment income which was likely weighed down by heightened non-accruals
• CEO Todd Owens and CIO Ivelin Dimitrov will both be stepping down in January. Mr. Owens will be replaced by Patrick Dalton, previously CEO of Gordon Brothers Finance Company and COO of Apollo Investment Corporation (NASD: AINV-$6.16-NEUTRAL).
• The company indicated that its incentive fee will be revamped to have a lookback feature to net realized and unrealized losses along with net investment income. Management did not provide much in terms of detail, but we highly doubt the lookback will take into account the massive losses of previous years and so we say “too little, too late”.
• FSC’s portfolio at fair value will likely decrease slightly through the next two fiscal years as stock repurchases provide a superior return on invested capital compared to new originations and balance sheet leverage is in excess of the company’s targeted range
• We are revising our fiscal 2017 NII/share estimate to $0.74 from $0.75 and are rolling out our fiscal 2018 NII/share estimate of $0.71.
Several other research firms have also weighed in on FSC. Deutsche Bank AG cut their target price on Fifth Street Finance Corp. from $6.75 to $6.50 and set a “buy” rating on the stock in a report on Tuesday, August 16th. Zacks Investment Research raised Fifth Street Finance Corp. from a “hold” rating to a “buy” rating and set a $6.50 price target on the stock in a research report on Tuesday. Eight analysts have rated the stock with a hold rating and four have assigned a buy rating to the company. Fifth Street Finance Corp. presently has an average rating of “Hold” and an average target price of $6.45.
Shares of Fifth Street Finance Corp. (NASDAQ:FSC) opened at 5.37 on Thursday. The firm’s 50-day moving average price is $5.58 and its 200 day moving average price is $5.50. Fifth Street Finance Corp. has a 52 week low of $4.40 and a 52 week high of $6.53.
The company also recently announced a monthly dividend, which will be paid on Friday, December 30th. Investors of record on Thursday, December 15th will be given a dividend of $0.06 per share. This represents a $0.72 dividend on an annualized basis and a yield of 13.41%. The ex-dividend date is Tuesday, December 13th. Fifth Street Finance Corp.’s dividend payout ratio (DPR) is presently -160.00%.
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Large investors have recently added to or reduced their stakes in the company. Delphi Financial Group Inc. increased its stake in Fifth Street Finance Corp. by 0.3% in the second quarter. Delphi Financial Group Inc. now owns 3,906,378 shares of the company’s stock worth $18,985,000 after buying an additional 11,398 shares during the period. The Manufacturers Life Insurance Company purchased a new stake in Fifth Street Finance Corp. during the third quarter worth $21,791,000. Ares Management LLC increased its stake in Fifth Street Finance Corp. by 112.5% in the third quarter. Ares Management LLC now owns 1,876,907 shares of the company’s stock worth $10,905,000 after buying an additional 993,699 shares during the period. Bank of Montreal Can purchased a new stake in Fifth Street Finance Corp. during the second quarter worth $8,097,000. Finally, Muzinich & Co. Inc. increased its stake in Fifth Street Finance Corp. by 32.1% in the third quarter. Muzinich & Co. Inc. now owns 1,496,507 shares of the company’s stock worth $8,695,000 after buying an additional 363,233 shares during the period. 30.99% of the stock is currently owned by institutional investors and hedge funds.
About Fifth Street Finance Corp.
Fifth Street Finance Corp. is a specialty finance company that lends to and invests in small and mid-sized companies, primarily in connection with investments by private equity sponsors. The Company’s investment objective is to maximize the portfolio’s total return by generating current income from the debt investments and capital appreciation from the equity investments.
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