Hercules Capital (HTGC) AI Stock Analysis

• Market Cap: $3.15B
• Dividend Yield: 10.46%
• Average Volume (3M): 1.30M
• Price to Earnings (P/E): 13.5
• Beta (1Y): 0.69
• Revenue Growth: -7.29%
• EPS Growth: -38.60%
• Country: US
• Employees: 100
• Sector: Financial
• Sector Strength: 73
• Industry: Asset Management
• EPS (TTM): 0.45
• Shares Outstanding: 175,426,130
• 10 Day Avg. Volume: 973,598
• 30 Day Avg. Volume: 1,300,716
• PEG Ratio: -0.63
• Price to Book (P/B): 1.18
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -3.89
• Enterprise Value/Market Cap: 1.02
• Enterprise Value/Revenue: 1.84
• Enterprise Value/Gross Profit: 9.97
• Enterprise Value/Ebitda: 2.98
• 1Y Price Target: $19.58
• Price Target Upside: 8.90% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 6

• Rating: 70 Outperform
• Price Target: ―

Hercules Capital's overall stock score reflects a mix of strengths and challenges. The company shows strong valuation with an attractive dividend yield and positive sentiment from recent earnings and corporate events. However, financial performance issues, particularly in revenue decline and cash flow, coupled with a weak technical outlook, temper the overall score.

Positive Factors

Earnings

HTGC offers a durable NOI profile with its earnings multiple now more in line with upper quartile peers.

Product Approval

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

Regulatory Approval

The FDA's approval of pruritus as a registrational endpoint for PSC and PBC reduces the regulatory risk and supports confidence in the efficacy of the next-generation IBAT inhibitor.

Negative Factors

Earnings Decline

Despite the $0.02 sequential decline in NII per share, base dividend coverage remained elevated at 123%.

Financial Performance

HTGC has been far from immune to the private markets morass with just 69% TTM NOI conversion.

Investment Performance

Annex Cloud was written down by 63ppt QoQ and moved to non-accrual.

Hercules Capital Business Overview & Revenue Model

Company Description

Hercules Capital, Inc. (HTGC) is a leading specialty finance company focused on providing flexible and innovative debt solutions to venture capital-backed companies in technology, life sciences, and sustainable and renewable technology industries. As a business development company (BDC), Hercules Capital offers debt financing solutions designed to meet the specific needs of growing companies, helping them scale their operations while minimizing equity dilution.

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 faces challenges with declining revenue and profitability, evidenced by negative net income and cash flow in the TTM period. The balance sheet remains strong with low leverage, but operational cash flow issues and negative free cash flow are significant concerns. These factors indicate the need for financial improvements to bolster investor confidence.

Income Statement

Hercules Capital's income statement shows a declining trend in revenue over the recent periods, decreasing from $460.7 million in 2023 to $388.3 million in TTM (Trailing-Twelve-Months). The net income turned negative in TTM, indicating challenges in profitability. Gross profit margin remains high, indicating efficient cost management despite revenue decline. However, the negative net income and declining revenue growth are concerning.

Balance Sheet

The balance sheet reveals a strong equity position with stockholders' equity consistently high relative to total assets, resulting in a healthy equity ratio. However, the debt-to-equity ratio is low due to minimal debt levels. This indicates low leverage, which is generally positive, but it also reflects limited growth through financing. The return on equity has seen fluctuations, impacted by varying net income levels.

Cash Flow

Cash flow analysis shows negative operating cash flow in TTM, indicating cash management issues. Free cash flow is also negative, reflective of operational challenges. The free cash flow to net income ratio is unfavorable, showing inefficiencies in converting earnings to cash. A positive aspect is the significant investing cash inflow in TTM, possibly from asset sales or investments.

Breakdown
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
388.30M	415.93M	460.67M	184.64M	255.13M	297.77M
	Gross Profit
322.74M	361.69M	459.07M	140.79M	218.16M	268.78M
	EBIT
185.56M	237.39M	387.57M	272.93M	174.16M	227.26M
	EBITDA
249.43M	0.00	405.29M	250.62M	213.39M	224.43M
	Net Income Common Stockholders
-90.96M	260.13M	337.48M	156.83M	174.16M	227.26M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
49.38M	42.68M	98.90M	2.90B	133.12M	198.28M
	Total Assets
4.03B	3.83B	3.42B	3.03B	2.60B	2.62B
	Total Debt
17.21M	18.19M	1.56B	1.58B	1.24B	1.30B
	Net Debt
-32.17M	-113.12M	1.46B	1.56B	1.11B	1.10B
	Total Liabilities
2.03B	1.84B	1.61B	1.63B	1.29B	1.33B
	Stockholders Equity
2.00B	1.99B	1.80B	1.40B	1.31B	1.29B
Cash Flow		Free Cash Flow
-405.51M	-118.09M	67.39M	-424.91M	128.51M	207.66M
	Operating Cash Flow
-405.13M	-118.09M	68.28M	-424.80M	128.62M	207.80M
	Investing Cash Flow
305.31M	-705.00K	-887.00K	-114.00K	-106.00K	-137.00K
	Financing Cash Flow
93.85M	119.20M	22.75M	314.52M	-229.87M	-85.04M

Hercules Capital Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 17.98
• 50DMA: Positive
• 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 Neutral. The current price of 17.98 is above the 20-day moving average (MA) of 17.76, above the 50-day MA of 17.35, and below the 200-day MA of 18.35, indicating a neutral trend. The MACD of 0.16 indicates Negative momentum. The RSI at 56.61 is Neutral, neither overbought nor oversold. The STOCH value of 76.02 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for HTGC.

Hercules Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TSLX	74 Outperform	$2.19B	12.36	11.06%	3.09%	5.00%	-24.20%
GBDC	71 Outperform	$3.91B	13.07	8.88%	10.62%	16.10%	-24.30%
GSBD	71 Outperform	$1.34B	26.42	3.27%	16.81%	-28.04%	-69.52%
TRIN	71 Outperform	$934.20M	6.60	17.56%	14.12%	46.14%	34.91%
HTGC	70 Outperform	$3.15B	13.51	11.30%	10.46%	-7.29%	-38.60%
NMFC	65 Neutral	$1.14B	10.69	8.11%	12.10%	-3.55%	-20.43%
Sector *	64 Neutral	$12.77B	9.71	7.85%	78.05%	12.07%	-7.97%

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.