Baird still believes Fidus Investment Corp FDUS remains one of the best positioned BDCs in the sector as it reiterated its Outperform rating and $17 price target on the shares, implying an upside of 8 percent from current levels.
A business development company is an organization that invests in and helps small- and medium-size companies grow in the initial stages of their development.
Fidus reported second quarter adjusted NII/share of $0.38, a penny behind Baird estimate and the $0.39/share quarterly dividend rate. Further, NAV/share increased sequentially to $15.52 from $15.25.
"FDUS has grown its NAV/share by $0.70/share since going public in 2Q11 and stands as one of only a handful of BDCs with a 3+ year operating history that have grown NAV/share since IPO," analyst Bryce Rowe wrote in a note.
On the balance sheet front, Fidus raised $43.7 million in net proceeds from a 2.875 million share common equity offering in late May and its SBA borrowings remained unchanged at $214 million. The analyst said the recently expanded SBIC legislation could ultimately provide Fidus up to $350 million in SBA borrowing capacity.
Rowe's $17 price target is based on a dividend discount model assuming 2016 dividends of $1.56, discounted at 10 percent assuming a 1 percent sustainable growth rate.
"Given its defensively positioned, liquidity-rich balance sheet coupled with its proven ability to preserve capital and generate attractive risk-adjusted returns, we continue to believe that FDUS should trade at a sustained premium to its peer group," Rowe added.
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