Hercules Capital (HTGC) AI Stock Analysis

• Market Cap: $2.91B
• Dividend Yield: 9.51%
• Average Volume (3M): 1.73M
• Price to Earnings (P/E): 10.5
• Beta (1Y): 0.76
• Revenue Growth: -1.49%
• EPS Growth: -29.48%
• Country: US
• Employees: 100
• Sector: Financial
• Sector Strength: 86
• Industry: Asset Management
• EPS (TTM): 1.61
• Shares Outstanding: 173,154,660
• 10 Day Avg. Volume: 1,909,424
• 30 Day Avg. Volume: 1,734,737
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 6.87
• Price to Cash Flow (P/CF): -28.50
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $20.50
• Price Target Upside: 21.81% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 5

Hercules Capital's overall score reflects a balance of strengths and challenges. The company's robust earnings performance and strategic financing initiatives are offset by technical weaknesses and profitability concerns. While valuation is attractive, the financial and cash flow issues require attention to maintain growth momentum.

Positive Factors

Competitive Positioning and Returns

Hercules, a direct lender with a two-decade track record successfully managing venture debt, has delivered impressive results to-date that has created significant value for HTGC shareholders.

Drug Approval and Market Expansion

Livmarli becomes the first approved drug for cholestatic pruritus in patients with ALGS and PFIC, marking a significant step in its global expansion.

Financial Performance

Livmarli's approval in Japan positions it for double-digit royalties on net sales, which is seen as a positive financial upside.

Negative Factors

Dividend Decline

Despite the $0.02 sequential decline in NII per share, base dividend coverage remained elevated at 123%, and undistributed earnings spillover ended the year at $0.96 per share, providing significant cushion and flexibility on future dividends.

Origination Performance

New origination was lighter this quarter, with the Hercules team nearly doubled up by venture-rival Trinity Capital.

Hercules Capital Business Overview & Revenue Model

Company Description

Hercules Capital, Inc. is a business development company. The firm specializing in providing venture debt, debt, senior secured loans, and growth capital to privately held venture capital-backed companies at all stages of development from startups, to expansion stage including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancing and established-stage companies. The firm provides growth capital financing solutions for capital extension; management buy-out and corporate spin-out financing solutions; company, asset specific, or intellectual property acquisition financing; convertible, subordinated and/or mezzanine loans; domestic and international corporate expansion; vendor financing; revenue acceleration by sales and marketing development, and manufacturing expansion. It provides asset-based financing with a focus on cash flow; accounts receivable facilities; equipment loans or leases; equipment acquisition; facilities build-out and/or expansion; working capital revolving lines of credit; inventory. The firm also provides bridge financing to IPO or mergers and acquisitions or technology acquisition; dividend recapitalizations and other sources of investor liquidity; cash flow financing to protect against share price volatility; competitor acquisition; pre-IPO financing for extra cash on the balance sheet; public company financing to continue asset growth and production capacity; short-term bridge financing; and strategic and intellectual property acquisition financings. It also focuses on customized financing solutions, emerging growth, mid venture, and late venture financing. The firm invests primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. The firm generally seeks to invest in companies that have been operating for at least six to 12 months prior to the date of their investment. It prefers to invest in technology, energy technology, sustainable and renewable technology, and life sciences. Within technology the firm focuses on advanced specialty materials and chemicals; communication and networking, consumer and business products; consumer products and services, digital media and consumer internet; electronics and computer hardware; enterprise software and services; gaming; healthcare services; information services; business services; media, content and information; mobile; resource management; security software; semiconductors; semiconductors and hardware; and software sector. Within energy technology, it invests in agriculture; clean technology; energy and renewable technology, fuels and power technology; geothermal; smart grid and energy efficiency and monitoring technologies; solar; and wind. Within life sciences, the firm invests in biopharmaceuticals; biotechnology tools; diagnostics; drug discovery, development and delivery; medical devices and equipment; surgical devices; therapeutics; pharma services; and specialty pharmaceuticals. It also invests in educational services. The firm invests primarily in United States based companies and considers investment in the West Coast, Mid-Atlantic regions, Southeast and Midwest; particularly in the areas of software, biotech and information services. The firm prefers to invest between $10 million to $250 million in equity per transactions. It invests generally between $1 million to $40 million in companies focused primarily on business services, communications, electronics, hardware, and healthcare services. The firm invests primarily in private companies but also have investments in public companies. For equity investments, the firm seeks to represent a controlling interest in its portfolio companies which may exceed 25% of the voting securities of such companies. The firm seeks to invest a limited portion of its assets in equipment-based loans to early-stage prospective portfolio companies. These loans are generally for amounts up to $3 million but may be up to $15 million for certain energy technology venture investments. The firm allows certain debt investments have the right to convert a portion of the debt investment into equity. It also co-invests with other private equity firms. The firm seeks to exit its investments through initial public offering, a private sale of equity interest to a third party, a merger or an acquisition of the company or a purchase of the equity position by the company or one of its stockholders. The firm has structured debt with warrants which typically have maturities of between two and seven years with an average of three years; senior debt with an investment horizon of less than three years; equipment loans with an investment horizon ranging from three to four years; and equity related securities with an investment horizon ranging from three to seven years. The firm prefers to invest through its balance sheet capital. The firm formerly known as Hercules Technology Growth Capital, Inc. Hercules Capital, Inc. was founded in December 2003 and is based in Palo Alto, California with additional offices in Connecticut; Boston, Massachusetts; San Diego, California; Westport, Connecticut; Elmhurst, Illinois; Santa Monica, California; McLean, Virginia; New York, New York; Radnor, Pennsylvania; and Washington, District of Columbia and London, United Kingdom.

How the Company Makes Money

Hercules Capital makes money primarily through the interest and fees charged on the debt financing provided to its portfolio companies. The company earns interest income from the loans it extends, which typically have higher interest rates due to the venture capital-backed nature of its clients. In addition to interest income, Hercules Capital often receives warrant positions, which can provide additional upside potential if the portfolio companies perform well. The company also benefits from prepayment and other fees associated with its lending activities. Hercules Capital's revenue model is further supported by its ability to secure capital at competitive costs, allowing it to maintain a favorable net interest margin. Strategic partnerships with venture capital firms and strong relationships with portfolio companies contribute to its earnings by enabling deal flow and providing insights into emerging industry trends.

Hercules Capital Financial Statement Overview

Summary

Hercules Capital displays strong operational efficiency and a solid financial structure. However, significant profitability challenges and cash flow issues, particularly a downturn in net income and negative free cash flow, present notable risks.

Income Statement

The income statement shows a mixed performance. The revenue growth has been erratic with a substantial revenue drop from 2023 to 2024. Gross and EBIT margins are positive, demonstrating good operational efficiency in 2023, but the net profit margin for 2024 is zero due to no net income, which is concerning. Overall, the company has strong operational capability but faces profitability challenges.

Balance Sheet

The balance sheet is robust with a high equity ratio, indicating financial stability and low reliance on debt. The debt-to-equity ratio is manageable, showing conservative leverage. Return on equity in 2023 was strong, but the lack of net income in 2024 affects ROE negatively. Overall, the balance sheet suggests a solid financial foundation, albeit with risks due to recent net income issues.

Cash Flow

Cash flow analysis reveals volatility, with negative free cash flow in 2024 due to negative operating cash flow. The operating cash flow to net income ratio was strong in 2023, but the negative free cash flow in 2024 shows cash management challenges. The cash flow statement indicates potential liquidity issues that need addressing.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
415.93M	460.67M	184.64M	255.13M	297.77M
	Gross Profit
361.69M	459.07M	140.79M	218.16M	268.78M
	EBIT
237.39M	387.57M	272.93M	174.16M	227.26M
	EBITDA
0.00	405.29M	250.62M	213.39M	224.43M
	Net Income Common Stockholders
262.97M	337.48M	156.83M	174.16M	227.26M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
42.68M	98.90M	2.90B	133.12M	198.28M
	Total Assets
3.83B	3.42B	3.03B	2.60B	2.62B
	Total Debt
18.19M	1.56B	1.58B	1.24B	1.30B
	Net Debt
-24.48M	1.46B	1.56B	1.11B	1.10B
	Total Liabilities
1.84B	1.61B	1.63B	1.29B	1.33B
	Stockholders Equity
1.99B	1.80B	1.40B	1.31B	1.29B
Cash Flow		Free Cash Flow
-118.09M	67.39M	-424.91M	128.51M	207.66M
	Operating Cash Flow
-118.09M	68.28M	-424.80M	128.62M	207.80M
	Investing Cash Flow
-705.00K	-887.00K	-114.00K	-106.00K	-137.00K
	Financing Cash Flow
119.20M	22.75M	314.52M	-229.87M	-85.04M

Hercules Capital Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 16.83
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HTGC, the sentiment is Negative. The current price of 16.83 is below the 20-day moving average (MA) of 18.46, below the 50-day MA of 19.43, and below the 200-day MA of 19.02, indicating a bearish trend. The MACD of -0.15 indicates Negative momentum. The RSI at 44.88 is Neutral, neither overbought nor oversold. The STOCH value of 48.09 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HTGC.

Hercules Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TRIN	80 Outperform	$867.70M	6.57	16.12%	15.04%	48.54%	6.64%
GBDC	76 Outperform	$3.63B	9.94	9.40%	12.13%	16.10%	-24.30%
TSLX	73 Outperform	$1.85B	9.76	12.02%	9.30%	8.07%	-22.25%
GSBD	69 Neutral	$1.19B	18.44	3.96%	16.52%	-28.04%	-69.52%
HTGC	67 Neutral	$2.91B	10.45	13.71%	9.51%	-1.49%	-29.48%
NMFC	66 Neutral	$1.00B	9.05	8.49%	13.85%	-3.55%	-20.43%
Sector *	64 Neutral	$13.37B	9.30	9.39%	4.85%	16.11%	-8.85%

Hercules Capital Corporate Events

Hercules Capital Closes $287.5M Convertible Notes Offering

On March 10, 2025, Hercules Capital, Inc. successfully closed a private offering of $287.5 million in 4.750% Convertible Unsecured Notes due 2028. The net proceeds of approximately $278.39 million will be used to fund investments in debt and equity securities and for general corporate purposes. The Convertible Notes, which are unsecured and bear interest semiannually, provide holders the option to convert them into cash, shares, or a combination thereof, with a conversion rate set at 46.5631 shares per $1,000 principal amount. This strategic financial move is expected to bolster Hercules Capital’s investment capabilities and strengthen its position in the venture growth financing market.

Hercules Capital Announces $250M Convertible Notes Offering

On March 5, 2025, Hercules Capital announced its plan to offer $250 million in Convertible Unsecured Notes due 2028, with an option for initial purchasers to buy an additional $37.5 million to cover overallotments. These notes will be offered to qualified institutional buyers and certain non-U.S. persons, subject to market conditions. The proceeds will be used for investments in debt and equity securities and general corporate purposes. The notes will mature on September 1, 2028, and will not be registered under the Securities Act, limiting their offer or sale in the U.S. without registration or exemption.