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Rising earnings estimates on the back of strong second quarter results – including a 48.2% earnings surprise – have helped TICC Capital Corp. (TICC) achieve a Zacks #1 Rank (Strong Buy) on August 30. Moreover, this non-diversified management investment company has delivered an average surprise of 28.2% over the past four quarters.
With a solid year-to-date return of 19.8% and a history of beating quarterly earnings estimates, this stock offers an attractive investment opportunity.
The Rank Driver
Better-than-expected second-quarter earnings and steady improvement in investment portfolio are the primary rank drivers for this stock. Moreover, continued improvement in investment income will help improve its profitability in the upcoming quarters.
On July 30, TICC Capital reported second-quarter 2012 net investment income of 40 cents per share, outpacing the Zacks Consensus Estimate of 27 cents by 48.2% and the year-ago earnings of 29 cents by 37.9%.
Second-quarter results were aided by impressive growth in total investment income. Nevertheless, considerably high expenses marginally marred the results.
Total investment income of $20.5 million surged 83.8% from the year-ago quarter. Significantly higher (almost 87%) total investment income from non-affiliated/non-control investments was primarily responsible for the surge.
Total expenses were $5.4 million, increasing significantly from $1.6 million in the prior-year quarter. The leap in the expenses was mainly due to higher incentive fees and investment advisory fees.
The fair value of TICC Capital’s total investment portfolio was $439.2 million as of June 30, 2012, up 12.2% from $391.5 million as of December 31, 2011. During the second quarter, the company provided approximately $62.1 million debt funding to new and existing portfolio companies.
Raising Earnings Estimate
The Zacks Consensus Estimate for 2012 increased 5.4% to $1.18 per share based on one out of three upward estimate revisions over the last 30 days. The current estimate implies a year-over-year growth of 28.6%.
For 2013, two out of five estimates were revised upward over the same time frame, lifting the Zacks Consensus Estimate by 5.3% to $1.19 per share.
TICC Capital currently trades at a forward P/E of 8.8x, an 11.7% discount to the peer group average of 9.9x. Also, on a price-to-book basis, the shares are trading at 1.09x, a 13.5% premium to the peer group average of 0.96x. Given the company's strong fundamentals, the valuation looks reasonable.
TICC Capital has a trailing 12-month ROE of 13.0% compared with the peer group average of 7.9%.
About the Company
Headquartered in Greenwich, Connecticut, TICC Capital is largely engaged in providing finance to technology-related companies. The company primarily focuses on investments in companies with annual revenues of less than $200 million and a market capitalization or enterprise value of less than $300 million. Incorporated in July 2003, the company started trading on NASDAQ from November 2003. It has a market capitalization of roughly $391.1 million.
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