Why Investors Are Retaining Blue Owl Capital (OBDC) Stock Now
Blue Owl Capital Corporation OBDC is well-poised to grow on the back of portfolio growth and a high interest rate environment, which is boosting its investment income. Its strategic acquisitions enhance business strength.
Blue Owl Capital — with a market cap of $5.4 billion — is a specialty finance company that lends funds to U.S. middle market companies. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for OBDC’s 2023 earnings is pegged at $1.85 per share, which remained stable in the past week. The estimate indicates a 31.2% year-over-year increase. Blue Owl Capital beat on earnings in all the last four quarters, with an average surprise of 4.5%.
The consensus mark for current-year revenues stands at more than $1.6 billion, suggesting a 28.7% rise from the prior-year reported number. Our estimate indicates a significant increase in interest income, which is likely to support the top-line growth.
We expect the company’s interest income to rise nearly 27% year over year in 2023. As a significant portion of its assets are floating in nature, the high-interest rate environment is projected to drive its investment income in 2023. Our estimate for this year’s total investment income signals more than 28% year-over-year growth.
The company’s focus on increasing shareholder value is commendable. Apart from providing regular dividends, Blue Owl Capital also offers a quarterly supplemental dividend. Its dividend yield of 9.5% is significantly higher than the industry average of 2.4%.
OBDC possesses a diversified portfolio with balanced weightage in different industries. This is expected to keep the company on its growth path, even in tough times. Its investments in Senior Secured loans enable it to avoid the impacts of volatility.
Key Risks
However, there are a few factors that investors should keep an eye on.
Its rising expenses on the back of higher interest costs will constrain profit growth. We expect total operating expenses to jump more than 27% this year. Also, its return on equity of 11.4% is lower than the industry average of 15.3%. Nevertheless, we believe that a systematic and strategic plan of action will drive OBDC’s growth in the long term.
Key Picks
Some better-ranked players in the broader Finance space are Synchrony Financial SYF, Sachem Capital Corp. SACH and Ponce Financial Group, Inc. PDLB, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Synchrony’s current year earnings has improved by 2.4% in the past 60 days. It has witnessed four upward estimate revisions during this time against no movement in the opposite direction. Also, the consensus mark for SYF’s revenues in 2023 suggests 6.5% year-over-year growth.
The Zacks Consensus Estimate for Sachem Capital’s current year earnings has improved by a penny in the past 60 days. During this time, SACH has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for the company’s revenues in 2023 suggests a 13.7% year-over-year jump.
The consensus mark for Ponce Financial’s current-year earnings indicates an 81.7% year-over-year improvement. It has witnessed one upward estimate revision in the past 60 days against no downward movement. Furthermore, the consensus mark for PDLB’s revenues in 2023 suggests a 3.4% year-over-year increase.
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Synchrony Financial (SYF) : Free Stock Analysis Report
Ponce Financial Group, Inc. (PDLB) : Free Stock Analysis Report
Sachem Capital Corp. (SACH) : Free Stock Analysis Report
Blue Owl Capital Corporation (OBDC) : Free Stock Analysis Report
