Runway Growth Finance (RWAY) is a business development company which invests in small and medium size company and returns over 90% of income to shareholders. It is specialized in investing in senior-secured loans (SSL) to late stage and growth companies.
The share price of RWAY tanked as the earning missed expectation slightly, which I consider to be a buying opportunity. I have positions at the price of $11.71
The company reported $0.45 earnings per share for the quarter, missing analysts' consensus estimates of $0.49 by ($0.04), Zacks reports. On the revenue line, the company reported $39.2 million, missing estimates by $1.2 million.
According to the 2023 earning call， “Runway generated strong risk adjusted returns, preserved leading credit quality and reduced our leverage to free up dry powder for new deals in a more lender friendly market in 2024”, and stock buyback, "Board approved a program to repurchase up to $25.0 million of outstanding common stock."
The target price has been cut by B.Riley to $13 but admit the "the company's solid fundamentals, which include lower balance sheet leverage, robust dividend coverage, and considerable liquidity. The firm expressed a continued appreciation for these aspects of Runway Growth Finance's profile."
About SSL (by Perplexity),
Senior secured loans, also known as senior bank loans or floating rate loans, are debt financing obligations issued to companies by banks or financial institutions. These loans are repackaged into a bundle of corporate loans that are sold to investors and hold legal claim to the borrower's assets above all other debt obligations
- Key points about senior secured loans include:
- They provide high-yield returns for investors and protection against inflation due to their floating interest rates[1].
- Historically, businesses with senior bank loans that filed for bankruptcy have often been able to cover the loans, ensuring repayment to lenders/investors