- Oppenheimer analyst Mitchel Penn downgraded Monroe Capital ( NASDAQ: MRCC ) on Monday to Perform from Outperform after macro headwinds led the analyst to increase his equity discount rate on the stock.
- Rate was increased by 75 basis points to 9.75%, which lowered Oppenheimer's price target on the stock to $10 per share from $11. Given the stock was trading at ~$9.15, Penn reduced his rating to Perform.
- Monroe Capital ( MRCC ) lost $0.34 per share in Q2 2022, a return on equity of -12.3% as credit spreads widened and rates rose driving net losses of $4.6M, or $0.21 per share, Penn wrote. He estimated that the company can earn $0.20 per share in 2022, resulting in ROE of 1.7% and $1.00 per share in 2023, resulting in 9.3% ROE.
- Penn also pointed out that MRCC had six investments on non-accrual with a cost of $41.6M and fair value of $10.8M.
- Penn's Perform rating aligns with the SA Quant rating of Hold and diverged from the average Wall Street rating of Buy.
- SA contributor On the Pulse recently discussed Monroe Capital's ( MRCC ) cyclical real estate exposure and history of book value growth
For further details see:
Monroe Capital downgraded to Perform at Oppenheimer on macro headwinds