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Wrapping up Q3 earnings, we look at the numbers and key takeaways for the specialty finance stocks, including Capital Southwest (NASDAQ:CSWC) and its peers.
Specialty finance companies provide targeted lending or financial services for specific industries or needs. They benefit from expertise in particular sectors, often reduced competition in specialized niches, and tailored underwriting that can yield higher margins. Challenges include concentration risk in specific industries, difficulty achieving scale efficiencies, and potential vulnerability during sector-specific downturns affecting their specialized markets.
The 10 specialty finance stocks we track reported a mixed Q3. As a group, revenues missed analysts’ consensus estimates by 5.8%.
While some specialty finance stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 1.9% since the latest earnings results.
Originally founded in 1961 as a venture capital investor that helped launch Texas Instruments, Capital Southwest (NASDAQ:CSWC) is a business development company that provides debt and equity financing to middle-market companies primarily in the United States.
Capital Southwest reported revenues of $56.95 million, up 16.9% year on year. This print exceeded analysts’ expectations by 2.2%. Despite the top-line beat, it was still a mixed quarter for the company with a decent beat of analysts’ revenue estimates but a significant miss of analysts’ EPS estimates.
In commenting on the Company’s results, Michael Sarner, President and Chief Executive Officer, stated, “The September quarter was an incredibly active quarter on the origination front for Capital Southwest, with approximately $245 million of originations in seven new and ten existing portfolio companies.”
The market was likely pricing in the results, and the stock is flat since reporting. It currently trades at $20.53.
Is now the time to buy Capital Southwest? Access our full analysis of the earnings results here, it’s free for active Edge members.
Operating in the often misunderstood world of debt collection since 1999, Encore Capital Group (NASDAQ:ECPG) purchases portfolios of defaulted consumer debt at deep discounts and works with individuals to recover these obligations while helping them toward financial recovery.
Encore Capital Group reported revenues of $460.4 million, up 25.4% year on year, outperforming analysts’ expectations by 11.9%. The business had an incredible quarter with a beat of analysts’ EPS and revenue estimates.
The market seems happy with the results as the stock is up 11.6% since reporting. It currently trades at $47.73.
Is now the time to buy Encore Capital Group? Access our full analysis of the earnings results here, it’s free for active Edge members.
Transforming from a traditional real estate investor to a digital-focused powerhouse in 2021, DigitalBridge Group (NYSE:DBRG) is a global digital infrastructure investment firm that manages capital and operates assets across data centers, cell towers, fiber networks, and edge infrastructure.
DigitalBridge reported revenues of $3.82 million, down 95% year on year, falling short of analysts’ expectations by 96.2%. It was a disappointing quarter as it posted a significant miss of analysts’ EBITDA and revenue estimates.
DigitalBridge delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 23.5% since the results and currently trades at $9.71.
Read our full analysis of DigitalBridge’s results here.
With a proprietary "CarbonCount" metric that quantifies the environmental impact of each dollar invested, HA Sustainable Infrastructure Capital (NYSE:HASI) is an investment firm that finances and develops climate-positive infrastructure projects across renewable energy, energy efficiency, and ecological restoration.
HA Sustainable Infrastructure Capital reported revenues of $139.2 million, up 51.5% year on year. This print beat analysts’ expectations by 58.5%. Overall, it was a stunning quarter as it also recorded a solid beat of analysts’ revenue estimates and an impressive beat of analysts’ EBITDA estimates.
HA Sustainable Infrastructure Capital achieved the biggest analyst estimates beat and fastest revenue growth among its peers. The stock is up 16.8% since reporting and currently trades at $33.35.
Named after the mythological hero known for his strength, Hercules Capital (NYSE:HTGC) is a business development company that provides debt financing to venture capital-backed and growth-stage technology and life sciences companies.
Hercules Capital reported revenues of $138.1 million, up 10.3% year on year. This number was in line with analysts’ expectations. Zooming out, it was a mixed quarter as it also logged EPS in line with analysts’ estimates but revenue in line with analysts’ estimates.
The stock is flat since reporting and currently trades at $17.45.
Read our full, actionable report on Hercules Capital here, it’s free for active Edge members.
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
StockStory’s analyst team — all seasoned professional investors — uses quantitative analysis and automation to deliver market-beating insights faster and with higher quality.
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