Saratoga Investment downgraded at Compass Point until risk-reward more balanced

Compass Point downgraded Saratoga Investment to Neutral from Buy with a price target of $24.75, down from $26.75. Saratoga’s high percentage of fixed-rate liabilities makes NII vulnerable to eventual rate declines, although the current cushion is “ample,” the analyst tells investors. Saratoga “should have a premium multiple of a ‘growth’ BDC,” argues the analyst, who is no longer willing to apply a target P/NAV multiple of 0.90x to its four-quarter forward projection of NAV, recognizing Saratoga’s high leverage. The firm reduced its rating to Neutral “until the risk-reward comes into better balance,” the analyst added.