Ladenburg Thalmann analyst Mickey Schleien downgraded Newtek Business Services Corp.'s stock rating to "neutral" from "buy," citing valuation.

Schleien noted that the company's debt-to-equity ratio has increased from 1.03x to 1.15x, and its management plans to gradually increase leverage. Newtek reiterated its SBA 7(a) loan funding guidance for 2019 of $580 million to $620 million and the analyst expects lower average SBA 7(a) net premiums in 2019 to be more than offset by volume growth as the company improves its close rate and continues to gain market share.

Schleien said the company has many investment merits, including a highly diverse loan portfolio and a differentiated business model with referral technology. He cited meaningful exposure to SBA 7(a) loan pricing, a complicated structure for a business development company with seasonality and dependence on the capital markets to sell guaranteed loans as some investment concerns.

The analyst's EPS estimate for Newtek is $2.14 for 2019.