Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.
Let’s turn to American Capital Ltd. (NASDAQ:ACAS). The business development firm is rare among its peers in that it hasn’t paid a dividend for years, but the stock has rebounded sharply lately. Let’s take an early look at what’s been happening with American Capital over the past quarter and what we’re likely to see in its quarterly report on Monday.
Stats on American Capital Ltd. (NASDAQ:ACAS)
|Analyst EPS Estimate||$0.25|
|Change From Year-Ago EPS||(63%)|
|Revenue Estimate||$147.8 million|
|Change From Year-Ago Revenue||(7.6%)|
|Earnings Beats in Past 4 Quarters||4|
Will American Capital keep seeing shares soar?
During the past three months, analysts have held their views on American Capital steady, with even full-year projections climbing by just a single penny. The stock, though, has continued its bullish run from earlier in 2012, rising nearly 10% since early November.
A big part of that run-up has come from the company itself. In December, American Capital said that it had spent more than $100 million to buy back 8.8 million shares. The stock has risen beyond the level of the buyback, and given how well past buyback operations have gone throughout 2012, with buys at prices from $7 to $11, management clearly hopes that its purchases continue to do well.
Still, many wonder why the company doesn’t pay a dividend. By contrast, rival BDCs Prospect Capital Corporation (NASDAQ:PSEC) and Apollo Investment Corp. (NASDAQ:AINV) have extremely healthy dividend payments, yielding around 11% and 9% respectively. But unlike American Capital, both Prospect and Apollo trade near or above book value, making share repurchases a less attractive use of shareholder capital.