Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of CapitalSource (UNKNOWN:UNKNOWN), a financial products provider to small and mid-tier businesses, dipped as much as 10% after reporting its first-quarter earnings results and receiving an analyst downgrade.
So what: For the quarter, CapitalSource reported EPS of $0.14 as it delivered 2.4% loan growth at CapitalSource Bank and a 24 basis-point increase in net interest margin. The $0.14 per-share profit matched the Street's expectations. CEO James Pieczynski did note that the first quarter is the company's seasonally weak quarter and that pricing pressures constrained its potential. However, Pieczynski also commented that CapitalSource's current loan growth still puts it on pace for double-digit growth in 2013. FBR Capital wasn't buying it, though, and downgraded CapitalSource to "market perform" from "outperform" with a price target of $9.50, implying minimal upside.
Now what: All told, I think this was a pretty strong quarter for CapitalSource. The company has been a champion at trying to do what's right by shareholders over the past couple of years. Although its 0.4% yield isn't much to look at, the company has repurchased 42% of its outstanding shares over the past 10 quarters, potentially making CapitalSource look undervalued since profits are divided into a smaller number of outstanding shares. Just the simple fact that it was able to boost its net interest margin in this environment is a testament to the quality of the management team. This is a company I'd encourage investors to dig more deeply into, as I believe you'll like what you find.
Craving more input? Start by adding CapitalSource to your free and personalized Watchlist so you can keep up on the latest news with the company.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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