Shares of Prospect Capital Company (PSEC) traded blended to barely constructive in early buying and selling on Tuesday after the enterprise improvement firm (BDC) reported fiscal second-quarter outcomes that includes a powerful adjusted earnings beat however a modest web loss on account of unrealized portfolio changes. The inventory has proven volatility over the previous yr, buying and selling in a 52-week vary of $2.45 to $4.47, and stays down roughly 36% during the last 12 months amid excessive-curiosity-price pressures and portfolio repositioning.
Firm Description
Prospect Capital Company is a closed-finish, non-diversified enterprise improvement firm that primarily lends to and invests in center-market privately held firms in the USA. Its portfolio consists of senior secured loans, junior debt, and fairness investments throughout roughly 32 industries. Prospect focuses on producing present revenue and lengthy-time period capital appreciation by means of direct lending and structured credit score investments, together with subordinated structured notes and actual property.
Present Inventory Value
$2.61 (Feb 10, 2026)
Market Capitalization
Roughly $1.23 billion
Valuation
Prospect trades at a major low cost to its web asset worth (NAV), with a value-to-e-book ratio of roughly 0.40x primarily based on NAV per share of $6.21. Whereas its ahead P/E is cited at 6.87x, the valuation is primarily pushed by its excessive dividend yield—at the moment exceeding 20%—and market issues over legacy fairness-linked and actual property belongings amid ongoing de-risking.
Fiscal Second Quarter 2026 Monetary Outcomes
Prospect reported outcomes for the quarter ended December 31, 2025, with secure-to-improved curiosity revenue however continued NAV stress from unrealized changes.
- Whole Funding Revenue (Income): Reported at $176 million, beating estimates (~$156–$159 million) and up sequentially from $157.6 million in Q1, although down yr-over-yr as the corporate rotates out of upper-yielding however riskier subordinated structured notes.
- Adjusted Web Funding Revenue: Got here in at $0.19 per share, considerably beating the analyst consensus of $0.10.
- Web Revenue (Loss): The corporate posted a web loss relevant to widespread shareholders of $6.6 million, or $(0.01) per share, in comparison with web revenue within the prior quarter, pushed by unrealized mark-to-market changes.
- Web Asset Worth (NAV): Declined to $6.21 per widespread share (whole web belongings ~$3.0 billion vary), down from $6.45 at September 30, 2025.
Earnings Name Themes and Strategic Shift
Within the convention name held on February 10, administration detailed ongoing efforts to reposition the stability sheet towards safer, senior secured belongings.
Key Speaking Factors:
- Asset Rotation: The corporate has elevated its first-lien senior secured mortgage combine to 71.1%, up over 700 foundation factors from mid-2024 ranges.
- Exit of Legacy Belongings: Administration highlighted the almost full exit from subordinated structured notes, which now characterize solely 0.3% of the portfolio.
- Actual Property Divestitures: Extra actual property properties have been offered since mid-2025 because the agency reduces publicity to focused fairness-linked securities.
- Liquidity and Debt Ladder: Prospect maintains $1.5 billion in mixed liquidity and has locked in a ladder of unsecured mounted-price debt extending to 2052, together with latest issuances to assist a staggered maturity profile.
Macro Pressures and Geopolitical Threat
Prospect faces broader sector pressures from excessive rates of interest, which assist curiosity revenue however elevate default danger amongst center-market debtors. Warnings round personal credit score valuations have weighed on BDC sentiment.
Geopolitical and Tariff Impression: Whereas Prospect invests primarily in U.S. center-market firms, it stays not directly uncovered to world provide chain disruptions and tariff impacts that would have an effect on portfolio firms’ margins, notably in manufacturing and healthcare companies. Administration stays cautious on inflationary pressures impacting borrower money flows.
Prospect Capital Corp (PSEC) SWOT Evaluation
Strengths
- Excessive Money Yield: Continues to declare constant month-to-month distributions, with over $4.6–$4.7 billion distributed since its IPO.
- Portfolio De-risking: Profitable shift towards first-lien senior secured debt (71.1% of combine) gives higher capital safety.
- Lengthy-Time period Debt Profile: Debt maturities prolonged by means of 2052 with a excessive proportion of unsecured mounted-price liabilities.
Weaknesses
- Persistent NAV Low cost: Market value stays considerably beneath e-book worth, reflecting issues over asset high quality and legacy investments.
- Earnings Volatility: Unrealized mark-to-market changes on fairness and actual property holdings contribute to web losses regardless of constructive NII.
- Declining Income Development: Whole funding revenue has moderated as the corporate exits greater-yielding subordinated debt devices.
Alternatives
- Capital Deployment: $1.5 billion in mixed liquidity permits the agency to capitalize on enticing new-challenge senior lending alternatives.
- Most well-liked Inventory Program: Enlargement of the 7.50% Perpetual Most well-liked Inventory program by way of iCapital Market gives a secure supply of non-dilutive capital.
Threats
- Default Threat: Sustained excessive rates of interest might stress curiosity protection ratios for center-market portfolio firms.
- Market Sentiment: Intense scrutiny of personal credit score valuations and excessive-yield BDCs might proceed to depress share costs.
- Institutional Exercise: Latest institutional exits have weighed on the inventory, although offset by selective insider shopping for.
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