Crown Capital Partners Inc 

Crown Capital Partners Inc. (TSX: CRWN) is a specialty finance company that provides investment management services and capital to middle-market companies. Its financing solutions include subordinated term and bridge loans, perpetual debt, income streaming, and royalties. The company operates through two segments namely, Specialty finance and Network services.

Why Should Investors Book Profit?

• Lower Interest revenues: In the reported period the company’s Interest revenue decreased to CAD 6.4 million, compared with CAD 7.2 million in Q2 2020, due primarily to a year-over-year decrease in the average level of interest-yielding loan investments.
• Falling adjusted funds from operations: The company’s adjusted fund from operations decreased to CAD 3.2 million compared with CAD 3.6 million in the previous corresponding period.
• Lower margin profile: The company reported degraded operating margins in Q2 2021 as compared to the industry, which indicts lower operational efficiency.

• Stretched Valuation: CRWN shares are available at an NTM P/BV multiple of 0.6x compared to the industry average of 0.1x. This implies that the shares are highly overvalued against the industry.
• Technical Indicators are suggesting potential price consolidation: Recently, the stock witnessed a healthy rally on the daily price chart and has moved above the upper band of the Bollinger Bands®, indicating the stock is perhaps overbought and due for a price correction or a consolidation.

Source: REFINITIV, Analysis by Kalkine Group

Stock recommendation

The firm recorded decreased interest revenue in Q2 2021, owing to a reduction in the average amount of interest-yielding loan investments year over year. Furthermore, adjusted funds from operations came on lower side, which is not a good indication. Moreover, the company's operating margins have deteriorated, implying reduced operational efficiency. In addition, the stock is quoting on stretched value. Additionally, the technical signal implies that the stock may be overbought and in need of a price correction or consolidation. As a result, at the closing price of CAD 6.05 on August 26, 2021, we suggest a “Sell” recommendation on the stock based on the aforementioned facts.

*The reference data in this report has been partly sourced from REFINITIV

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