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On Tuesday, Keefe, Bruyette & Woods, a financial services specialist firm, updated its outlook on Solar Capital Ltd (NASDAQ:SLRC), increasing the price target to $17.00, up from the previous $16.00. The firm maintained its Market Perform rating on the stock.
The adjustment followed a review of Solar Capital’s recent financial performance. Keefe, Bruyette & Woods highlighted that Solar Capital had a stable quarter, which contributed to a solid year overall. The company’s net investment income (NII) surpassed the firm’s estimates. Furthermore, the level of non-accruals remained steady and accounted for less than 1% of the investment portfolio, indicating a healthy credit environment for the company.
The analysts noted that Solar Capital’s portfolio yield has shown resilience against rate and spread declines, largely due to a significant portion of its assets being allocated in specialty finance verticals. Additionally, the company experienced an uptick in dividend income this quarter, which was attributed to increased income from its asset-based lending (ABL) businesses.
Keefe, Bruyette & Woods justified the raised price target by citing the above-average credit quality of Solar Capital and an upward revision of the 2025 earnings estimate. The new target price is based on a 9.9% earnings yield, which translates to 10.1 times the price-to-earnings (P/E) ratio on the firm’s 2025 earnings projection. This target price also reflects a price-to-net asset value (P/NAV) ratio of 0.93x.
The analyst’s statement concluded with an affirmation of the adjusted target price, reflecting confidence in Solar Capital’s credit quality and the increased income projection for 2025.
In other recent news, SLR Investment Corp reported its fourth-quarter 2024 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.44, compared to the forecast of $0.4315. However, the company’s revenue fell short of projections, totaling $55.58 million against an expected $57.37 million. The company demonstrated solid performance with an increase in net asset value (NAV) to $18.20 per share, up from $18.09 a year ago. The total portfolio value reached $3.1 billion, with a yield of 12.1%, slightly higher than the previous year’s 11.8%.
SLR Investment’s net investment income rose by 5% year-over-year to $1.77 per share, maintaining a robust portfolio with a focus on specialty finance. The company remains optimistic about future prospects, particularly in sponsor finance and asset-based lending (ABL), and plans to expand its ABL pipeline. Analysts highlighted the company’s strategic focus on specialty finance investments, noting the potential for increased merger and acquisition activity. Despite the revenue miss, the company’s performance in Q4 2024 reflects its ability to navigate economic fluctuations and maintain strong earnings.
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