Shares of Saratoga Investment Corp. SAR gained 1.2% in aftermarket trading in response to better-than-expected second-quarter fiscal 2022 (ended Aug 31) results. Adjusted net investment income of 63 cents per share beat the Zacks Consensus Estimate of 53 cents. The bottom line was up 28.6% year over year.
Results were aided by a rise in total investment income and a solid balance sheet. Further, overall portfolio activity remained decent in the reported quarter with strong originations. However, higher expenses posed a headwind.
Net investment income came in at $6.4 million, up 19.8% from the prior-year quarter.
Total Investment Income & Expenses Rise
Total investment income was $18.4 million, jumping 33.1% year over year. The rise mainly resulted from higher interest income, dividend income, and management fee income.
Total operating expenses increased 41.4% from the prior-year quarter to $12 million.
Total Portfolio Value & Originations Decent
The fair value of Saratoga Investment’s total investment portfolio was $666.1 as of Aug 31, 2021, up 31.1% year over year. This was primarily invested in 43 portfolio companies and one collateralized loan obligation fund.
In the reported quarter, the company originated $116 million in four new and six existing portfolio companies and had $134.8 million in an aggregate amount of exits and repayments, including realized gains. Thus, this resulted in net repayments of $18.8 million.
Strong Balance-Sheet Position
As of Aug 31, 2021, Saratoga Investment’s net asset value was $28.97 per share compared with $26.68 on Aug 31, 2020.
With $45 million available under the credit facility and $73.3 million of cash and cash equivalents as of Aug 31, 2021, Saratoga Investment has a total of $118.3 million of undrawn borrowing capacity and cash and cash equivalents. Also, the company had $111 million in undrawn SBA debentures from the most recently approved SBIC II license to finance new SBIC-eligible portfolio companies.
Share Repurchase Update
During the quarter, Saratoga Investment repurchased 9,623 shares at the average price of $25.85 for roughly $0.2 million.
Solid loan origination activity continues to be on track and this is expected to support Saratoga Investment’s financials. However, steadily rising operating costs pose a concern.
Saratoga Investment Corp Price, Consensus and EPS Surprise
Saratoga Investment Corp price-consensus-eps-surprise-chart | Saratoga Investment Corp Quote
Currently, Saratoga Investment carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Stocks
Hercules Capital Inc.’s HTGC second-quarter 2021 net investment income of 32 cents per share was in line with the Zacks Consensus Estimate. The figure indicates no change from the year-ago quarter’s reported number.
Ares Capital Corporation’s ARCC second-quarter 2021 core earnings of 53 cents per share surpassed the Zacks Consensus Estimate of 43 cents. Moreover, the bottom line reflects a rise of 35.9% from the prior-year quarter’s reported number.
FS KKR Capital Corp.’s FSK second-quarter 2021 adjusted net investment income per share of 74 cents surpassed the Zacks Consensus Estimate of 61 cents. In the prior-year quarter, the company reported earnings of 62 cents. The reported quarter’s results exclude accretion resulting from the merger with FS KKR Capital Corp. II.
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