Main Street Capital: Risks Ahead of Earnings

Main Street Capital (NYSE: MAIN) is beloved for its historical underwriting performance, which has translated into industry-leading stock returns for its investors. Shares now trade at a 73% premium to book value, whereas the median company in its industry trades at a 5% discount to book.

Given its sky-high book value multiple, investors should remain focused on the risks that threaten its high valuation. If Main Street Capital were to trade down to the valuation of the second highest-valued business-development company (Hercules Capital at 1.37 times book), investors would stand to lose nearly three years of dividends to capital losses.

With this in mind, it's prudent to keep an eye on what could potentially rattle Main Street Capital's underlying business, and its share price. Here are three things worth studying carefully when Main Street Capital reports earnings on Aug. 3, and for the remainder of the year.

Source: Fool.com