On Wednesday, Ladenburg Thalmann issued a report on Monroe Capital (NASDAQ:MRCC), reducing the price target on the company's shares to $9.00 from the previous $9.50. Despite the price target adjustment, the firm maintains a Buy rating on the stock.
The report pointed to a slight deterioration in asset quality quarter over quarter. In the fourth quarter of 2023, Monroe Capital had five portfolio companies on non-accrual investments within its main investment portfolio. This was an increase from four in the third quarter of 2023. The companies on non-accrual status included Education Corp of America, NECB, Foreman Mills, Arcstor Midco, and Thrasio, the latter being a new addition to the list.
The total of debt and preferred equity non-accrual credits was estimated to be $18.5 million at cost, which is an increase from $15.7 million in the third quarter of 2023. This figure represents 3.2% of the portfolio, up from 2.9%. On a fair value basis, the non-accrual credits were valued at $7.5 million, or 1.6% of the portfolio, which is an increase from $6.2 million or 1.2% in the previous quarter.
The analyst from Ladenburg Thalmann noted that these levels of non-accrual investments are considered quite manageable. Additionally, the number of non-accrual portfolio companies in Monroe Capital's senior loan fund remained stable at four, the same as in the third quarter of 2023. One of these companies, Avison Young, underwent restructuring in the first quarter of 2024.
The analyst commented that this restructuring is not expected to impact net investment income (NII), as the company has been on non-accrual for the last two quarters.
InvestingPro Insights
Following the report from Ladenburg Thalmann on Monroe Capital (NASDAQ:MRCC), the InvestingPro platform provides additional insights that may be of interest to investors. Monroe Capital's dedication to shareholder returns is evident from its significant dividend yield, currently at 13.37%, and its history of maintaining dividend payments for 13 consecutive years. This commitment to consistent shareholder payouts aligns with the firm's belief in the company's stability and the analyst's maintained Buy rating.
InvestingPro data also shows that Monroe Capital has a market capitalization of $162.06 million and a trailing twelve-month revenue of $64.3 million, which has grown by 13.67% as of Q4 2023. These figures highlight the company's financial size and recent performance, which could be factors in Ladenburg Thalmann's assessment of the stock. Moreover, Monroe Capital's price-to-earnings (P/E) ratio stands at 437.65, which may be a point of consideration for investors evaluating the stock's value.
It is worth noting that two analysts have recently revised their earnings estimates downwards for the upcoming period, as per InvestingPro Tips. This could be reflective of the slight deterioration in asset quality reported by Ladenburg Thalmann. However, Monroe Capital's profitability over the last twelve months and the fact that its liquid assets exceed short-term obligations suggest a potentially resilient financial position.
For those interested in further analysis and metrics, InvestingPro offers additional tips for Monroe Capital. Using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a total of 5 InvestingPro Tips for Monroe Capital, which may provide a deeper understanding of the company's financial health and future prospects.
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