Market Overview

Further Upside Looks Limited For These 3 BDCs

Further Upside Looks Limited For These 3 BDCs

Baird has downgraded business development companies Fidus Investment Corp (NASDAQ: FDUS), Monroe Capital Corp (NASDAQ: MRCC) and Main Street Capital Corporation (NYSE: MAIN) to Neutral from Outperform, saying risk/reward in these stocks appears balanced at current valuations.

Instead, the brokerage recommends OFS Capital Corp (NASDAQ: OFS) for fresh money.

“We would continue to maintain positions given attractive dividend yields but further price appreciation appears limited,” analyst Bryce Rowe wrote in a note.

For Fidus, Rowe sees limited upside to $17 target price, which suggests shares should trade at a 10 percent premium to NAV/share compared to its current 7 percent premium. The analyst trimmed his 2017 NII/share estimate to $1.49 from $1.61 to reflect from the December issuance of 3.2 million shares.

In addition, the analyst has a $16 price target on Monroe, with 2017 NII/share estimate remaining at $1.44. That said, Rowe believes consensus 2017 NII/share of $1.61 could prove high if dividend income from Rockdale Blackhawk declines.

Also, Rowe said the $37 target price on Main Street suggests the stock is trading around 170 percent of NAV/share. Longer term, the analyst believes Main Street could trade at or above 200 percent of NAV/share given its ability to generate an average return on equity about 15 percent across a full market cycle.

At Last Check

  • Fidus shares were down 3.72 percent at $16.03.
  • Main Street was down 1.11 percent at $36.42.
  • Monroe was down 1.99 percent at $15.46.
  • OFS Capital was flat at $13.98.

Latest Ratings for FDUS

Aug 2019DowngradesBuyNeutral
Jun 2019Initiates Coverage OnBuy
Jan 2017Initiates Coverage OnMarket Perform

View More Analyst Ratings for FDUS
View the Latest Analyst Ratings

Posted-In: Baird Bryce RoweAnalyst Color News Downgrades Price Target Analyst Ratings Movers Best of Benzinga


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