OFS Capital (NASDAQ:OFS)‘s stock had its “buy” rating reaffirmed by stock analysts at National Securities in a research report issued to clients and investors on Monday. They currently have a $15.00 target price on the investment management company’s stock. National Securities’ price target suggests a potential upside of 30.10% from the stock’s previous close.
The analysts wrote, “ OFS earned $0.35 of NII/share for 3Q18, matching our estimate and exceeding the quarterly dividend by a penny. We think that earnings will be up a couple cents in 4Q18 as a result of OID acceleration before further portfolio growth and balance sheet leverage increasing through 2019 drive further earnings growth.
The company had strong portfolio growth in the quarter, with the portfolio at cost increasing to $398.6 million from $366.1 million Q/Q. In 4Q18, OFS issued seven-year notes at a 6.50% coupon that we anticipate will have the overallotment option exercised in full which would lead to a gross debt issuance of $50.0 million.
We think the notes offering was done at favorable pricing to the company and the proceeds will pay-down the revolver in full while also permitting portfolio growth into year-end 2018 and thus should not cause any drag on earnings.
We think that all-in effective yield will increase modestly Y/Y for 2019 as a result of spread widening. We note that OFS’s platform has $2.2 billion of AUM and the LMM, non-sponsor focus of the company combined with the underwriting capabilities of the platform also bodes well for pricing power.
NAV/share increased by 5 cents on the quarter to $13.75 with non-accruals remaining flat at $12.4 million at cost or 3.1% of the portfolio. However, previous non-accrual Master Cutlery was marked down to 35.3% of cost from 48.0% of cost Q/Q. The other non-accruals, Southern Technical Institute and Community Intervention Services, have been marked at zero since 1Q18 and 4Q17, respectively.
We are revising our 2018 NII/share estimate to $1.35 from $1.32 and our 2019 NII/share estimate to $1.47 from $1.45 and maintaining our BUY rating and $15 price target.”
A number of other equities research analysts also recently issued reports on OFS. Zacks Investment Research upgraded OFS Capital from a “hold” rating to a “buy” rating and set a $13.00 price target for the company in a research note on Tuesday, July 10th. TheStreet downgraded OFS Capital from a “b-” rating to a “c” rating in a research note on Tuesday, July 10th. Finally, ValuEngine upgraded OFS Capital from a “sell” rating to a “hold” rating in a research note on Friday, September 7th.
OFS Capital stock opened at $11.53 on Monday. The stock has a market cap of $148.72 million, a price-to-earnings ratio of 9.01 and a beta of 0.64. OFS Capital has a 52-week low of $10.41 and a 52-week high of $12.75. The company has a quick ratio of 5.00, a current ratio of 5.00 and a debt-to-equity ratio of 0.85.
OFS Capital (NASDAQ:OFS) last released its quarterly earnings results on Friday, November 2nd. The investment management company reported $0.35 earnings per share (EPS) for the quarter, beating the Zacks’ consensus estimate of $0.34 by $0.01. The business had revenue of $10.98 million during the quarter, compared to the consensus estimate of $10.40 million. OFS Capital had a return on equity of 9.15% and a net margin of 46.21%. On average, sell-side analysts expect that OFS Capital will post 1.31 earnings per share for the current fiscal year.
Several large investors have recently made changes to their positions in OFS. JPMorgan Chase & Co. grew its stake in shares of OFS Capital by 48.5% during the 1st quarter. JPMorgan Chase & Co. now owns 201,187 shares of the investment management company’s stock valued at $2,257,000 after acquiring an additional 65,746 shares during the period. UBS Group AG grew its stake in shares of OFS Capital by 6.0% during the 1st quarter. UBS Group AG now owns 302,083 shares of the investment management company’s stock valued at $3,390,000 after acquiring an additional 16,989 shares during the period. Finally, Wedge Capital Management L L P NC bought a new position in shares of OFS Capital during the 3rd quarter valued at approximately $744,000. Institutional investors own 24.52% of the company’s stock.
About OFS Capital
OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It does not invest in operational turnarounds or start-up businesses. For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies.
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