On Friday, RBC (TSX:RY) Capital adjusted its outlook on Blue Owl Capital Corp. (NYSE: OBDC) shares, raising the price target to $17 from the previous $16, while keeping its Outperform rating intact. The move reflects the firm's updated estimates following Blue Owl Capital's first-quarter performance.
The revision comes as the company maintains low levels of non-accruals, which experienced a slight increase during the first quarter.
RBC Capital also noted that the average interest coverage ratio (ICR) is expected to have reached its lowest point, assuming interest rates stay consistent.
Blue Owl Capital is recognized for its potential to generate a return on equity (ROE) that surpasses its peers, a key factor contributing to RBC Capital's positive stance on the company. The firm's emphasis on credit quality is another aspect that supports the Outperform rating.
RBC Capital's commentary highlighted the strategic adjustments made post first-quarter analysis, stating, "We are revising our estimates post 1Q. Non-accruals remain at low levels (though ticked up in 1Q); avg ICR likely troughed if rates remain at these levels."
The firm concluded its assessment by expressing continued support for Blue Owl Capital, emphasizing the company's robust ROE generation potential and commitment to maintaining high credit quality, which led to the fine-tuning of the price target to $17.
InvestingPro Insights
Following RBC Capital's optimistic assessment of Blue Owl Capital Corp. (NYSE: OBDC), current metrics from InvestingPro reinforce the firm's positive outlook. With a market capitalization of $6.38 billion and a strong P/E ratio of 8.24, Blue Owl Capital presents itself as a substantial player in its sector. The company's revenue growth is also notable, with a 21.94% increase in the last twelve months as of Q1 2024, and a quarterly growth of 5.81% in Q1 2024, reflecting a consistent upward trajectory.
Investors looking for income will appreciate Blue Owl Capital's significant dividend yield of 10.44%, as of March 2024, which is particularly attractive in today's market. Additionally, the company's stock trades with low price volatility, offering a relatively stable investment option. It is also worth mentioning that Blue Owl Capital has been profitable over the last twelve months and is trading near its 52-week high, at 98.68% of the peak price, indicating strong market confidence.
However, InvestingPro Tips suggest that investors should be aware that analysts have recently revised their earnings estimates downwards for the upcoming period. Also, the valuation implies a poor free cash flow yield, which could be a point of consideration for those focused on cash flow metrics. For those interested in a deeper dive, there are 6 additional InvestingPro Tips available for Blue Owl Capital, which can be explored at https://www.investing.com/pro/OBDC. To gain access to these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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