Over the past six months, Main Street Capital’s shares (currently trading at $54.78) have posted a disappointing 5.1% loss, well below the S&P 500’s 4% gain. This might have investors contemplating their next move.
Is now the time to buy Main Street Capital, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Main Street Capital Not Exciting?
Even with the cheaper entry price, we don't have much confidence in Main Street Capital. Here are three reasons you should be careful with MAIN and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, market returns, and industry trends. Main Street Capital’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 6.4% over the last two years was well below its five-year trend. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
2. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Main Street Capital, its EPS declined by 1.7% annually over the last two years while its revenue grew by 6.4%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Substandard TBVPS Growth Indicates Limited Asset Expansion
Tangible book value per share (TBVPS) serves as a key indicator of a financial institution’s strength, representing the hard assets available to shareholders after removing intangible assets that could evaporate during economic distress.
Although Main Street Capital’s TBVPS increased by 8.3% annually over the last five years, growth has recently decelerated a bit to a mediocre 6.8% over the past two years (from $29.20 to $33.33 per share).
Final Judgment
Main Street Capital’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 13.3× forward P/E (or $54.78 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of Main Street Capital
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