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Saratoga Investment (SAR) Down 3.6% on Q3 Earnings Miss

Saratoga Investment Corp.’s SAR shares have lost 3.6% since the announcement of third-quarter fiscal 2022 (ended Nov 30) results earlier this week. Adjusted net investment income of 53 cents per share lagged the Zacks Consensus Estimate of 55 cents. The bottom line, however, was up 6% year over year.

Higher operating expenses were the undermining factor. Nonetheless, an increase in total investment income and a solid balance sheet as well as originations supported the results to some extent.

Net investment income came in at $16.5 million, up 15.5% from the prior-year quarter.

Total Investment Income & Expenses Rise

Total investment income was $16.5 million, jumping 15.5% year over year. The rise mainly resulted from higher interest income, dividend income and management fee income.

Total operating expenses increased 15.2% from the prior-year quarter to $11.3 million.

Total Portfolio Value & Originations Decent

The fair value of Saratoga Investment’s total investment portfolio was $661.8 as of Nov 30, 2021, up 21% year over year. This was primarily invested in 43 portfolio companies and one collateralized loan obligation fund.

In the reported quarter, the company originated $58.6 million in two new and six existing portfolio companies and had $66.4 million in an aggregate amount of exits and repayments, including realized gains. Thus, this resulted in net repayments of $7.8 million.

Strong Balance Sheet Position

As of Nov 30, 2021, Saratoga Investment’s net asset value was $29.17 per share compared with $26.84 in the corresponding period of 2020.

With $37.5 million available under the credit facility, and $144.1 million of cash and cash equivalents as of Nov 30, 2021, Saratoga Investment has a total of $179.1 million of undrawn borrowing capacity and cash and cash equivalents.

Also, the company had $76 million in undrawn SBA debentures from the most recently approved SBIC II license to finance new SBIC-eligible portfolio companies.

Our Take

Solid loan origination activity continues to be on track, which is expected to support Saratoga Investment’s financials. However, steadily rising operating costs pose a concern.

Saratoga Investment Corp Price and EPS Surprise

Saratoga Investment Corp price-eps-surprise | Saratoga Investment Corp Quote

Currently, Saratoga Investment carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

TriplePoint Venture Growth BDC Corp.’s TPVG third-quarter 2021 (ended Sep 30) net investment income was 32 cents per share, missing the Zacks Consensus Estimate of 35 cents. TPVG’s bottom line also declined 20% from the year-ago quarter.

TriplePoint’s results reflected a decline in total investment income and higher expenses. Nonetheless, TPVG’s robust portfolio activity was a tailwind.

Hercules Capital Inc.’s HTGC third-quarter 2021 net investment income of 33 cents per share beat the Zacks Consensus Estimate by a penny. HTGC’s bottom line was down 2.9% from the year-ago figure.

Hercules Capital recorded a marginal fall in total investment income and higher expenses for the quarter. HTGC’s balance sheet position remained strong and new commitments were robust.

Ares Capital Corporation’s ARCC third-quarter 2021 core earnings of 47 cents per share beat the Zacks Consensus Estimate of 45 cents. ARCC’s bottom line reflected a rise of 20.5% from the prior-year quarter.

Ares Capital’s results were aided by a rise in total investment income. ARCC’s portfolio activity remained solid in the quarter. Yet, an increase in expenses was the undermining factor.


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Ares Capital Corporation (ARCC): Free Stock Analysis Report
 
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