Main Street Capital's stock has climbed tantalizingly near the buy point of a new base as the investment firm's earnings ramp up. That makes this fresh entrant to the IBD 50 among growth stocks to watch.
Houston-based Main Street is a business development company that provides debt and equity capital to lower middle market businesses. It operates in a field that lacks efficiency and competition. As of September, the company said it had more than $5.1 billion in investment capital under management and 177 portfolio companies. Main Street aims its investments, which average $14.2 million, primarily at helping companies grow, management buyouts/change of control, recapitalizations and acquisitions.
MAIN stock has formed a double-bottom base with a buy point of 45.31, according to MarketSmith chart analysis. Shares eased 0.1% to 44.02 Wednesday, 2.5% below the buy point.
This growth stock to watch has fought its way back up to new-high territory, just above levels last seen in early 2020 when Covid pandemic restrictions all but shut down operations of many businesses. From a record high of 45.10 in February 2020, MAIN stock cratered 69% in about five weeks to as low as 14.11.
Growth Stock To Watch Rebounds
From there it rebounded, getting back above its 50-day moving average by May 2020. From there the stock mostly stayed at or just below the 50-day as it worked its way back to a new high. Along the way Main Street cleared a long flat base in October, running up 8% to a record high of 47.13 on Nov. 22 last year. That's where it's current base started.
Main Street Capital ranks No. 9 in its investment management group, according to Stock Checkup. The group itself ranks No. 92 of IBD's 197 industry groups ranked by stock price performance. Not great, but there are a couple of other highly rated members of the IBD 50 in the group that are making some noise: Ares Management and Blackstone are also working on double-bottom bases. Ares' buy point is 84.20. Blackstone's buy point is 136.56.
Main Street's Relative Strength Rating is a decent 86. But its relative strength line, which measures stock price performance against the S&P 500, would provide more confidence in the stock's strength if the RS line could establish a clear uptrend.
Main Street has a modest Earnings Per Shares Rating of 78 out of a highest possible 99. Not the usual mark of a growth stock to watch. But the company's earnings are in recovery mode. After declining 5% in the fourth quarter of 2020, they resumed growth. In the first three quarters of 2021, earnings per share growth accelerated 2%, 29% and 54%. Sales have followed a similar arc, rising 3%, 12% 29% and 48% in the past four quarters.
Fourth quarter earnings are due Feb. 25. Consensus estimates of analysts tracked by FactSet put EPS at 66 cents a share, up 12% from 59 cents a year earlier. Sales are forecast to rise 16% to $72.5 million.
For the full year, Wall Street sees EPS climbing 24% to $2.61 on a sales increase of 25% to $279.2 million.
While not generally the focus of growth stocks to watch, Main Street Capital has a hefty dividend yield of 5.9%.
