Capital Southwest (CSWC)
NASDAQ:CSWC
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Capital Southwest
(NASDAQ:CSWC)
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Rating:72Outperform
Price Target:
$25.00
â–²(8.08% Upside)
Action:ReiteratedDate:02/26/26
The score is driven primarily by mixed financial performance—strong profitability and improving leverage offset by consistently negative cash generation—alongside a constructive earnings call centered on dividend support, liquidity, and credit quality. Valuation is supportive (moderate P/E and high yield), while technical indicators are neutral-to-soft and limit upside conviction.
Positive Factors
High-quality credit mix and underwriting
A portfolio overwhelmingly first‑lien and sponsor‑backed with low per‑company exposure provides structural downside protection and diversification. Over months this reduces loss severity, supports stable yield generation, and allows disciplined deployment into middle‑market loans even if markets tighten.
Negative Factors
Negative operating and free cash flow
Consistent negative operating and free cash flow signals the company is not converting accounting earnings into cash, increasing dependence on capital markets and financing. Over months this raises funding, liquidity, and dividend sustainability risks if access to markets tightens.
Read all positive and negative factors
Positive Factors
Negative Factors
High-quality credit mix and underwriting
A portfolio overwhelmingly first‑lien and sponsor‑backed with low per‑company exposure provides structural downside protection and diversification. Over months this reduces loss severity, supports stable yield generation, and allows disciplined deployment into middle‑market loans even if markets tighten.
Read all positive factors
Capital Southwest (CSWC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.37B
Dividend Yield11.9%
Average Volume (3M)603.73K
Price to Earnings (P/E)9.7
Beta (1Y)0.69
Revenue Growth25.28%
EPS Growth-1.69%
CountryUS
Employees27
SectorFinancial
Sector Strength70
IndustryAsset Management
Share Statistics
EPS (TTM)0.64
Shares Outstanding60,162,020
10 Day Avg. Volume534,086
30 Day Avg. Volume603,729
Financial Highlights & Ratios
PEG Ratio-0.53
Price to Book (P/B)1.20
Price to Sales (P/S)6.46
P/FCF Ratio-4.84
Enterprise Value/Market Cap1.31
Enterprise Value/Revenue8.41
Enterprise Value/Gross Profit12.03
Enterprise Value/Ebitda14.77
Forecast
1Y Price Target
$24.00Price Target Upside3.76% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
EPS Forecast (FY)2.31
Revenue Forecast (FY)$258.82M
Capital Southwest Business Overview & Revenue Model
Company Description
Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, recapital...
How the Company Makes Money
Capital Southwest generates revenue primarily through interest income from its debt investments, which include senior secured loans and subordinated debt. The company earns interest on these loans, which typically have fixed or floating interest r...
Capital Southwest Earnings Call Summary
Earnings Call Date:Feb 02, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:May 25, 2026
Earnings Call Sentiment Positive
The call conveyed a clear message of operational strength and disciplined execution: solid recurring earnings ($0.60 pretax NII per share), robust UTI ($1.02 per share) and realized gains, healthy originations and 19% YoY credit portfolio growth, high-quality first-lien and sponsor-backed loan mix, strong liquidity, and successful capital markets activity (debt refinancing and accretive ATM issuance). Management also announced a strategic JV expected to enhance competitiveness and returns. Headwinds include persistent spread compression and competition in the lower middle market, a notable consumer sector exposure with somewhat higher leverage, reliance on ATM access, JV ramp/execution risk, and emerging AI-related underwriting considerations. On balance, highlights substantially outweigh the identified lowlights.Positive Updates
Strong recurring earnings and pretax NII
Pretax net investment income of $34.6 million, or $0.60 per share for the quarter, supported by strong recurring earnings across the portfolio.
Negative Updates
Spread compression and competitive pressure
Spreads have compressed over the past 12–18 months (debt spread noted moving from 7.35% to ~7.24% since 3/31/2025), and newly originated deal spreads sit in the mid-sixes (~6.4%), reflecting a tight pricing environment and elevated competition from banks and nonbank lenders.
Read all updates
Q3-2026 Updates
Positive
Negative
Strong recurring earnings and pretax NII
Pretax net investment income of $34.6 million, or $0.60 per share for the quarter, supported by strong recurring earnings across the portfolio.
Read all positive updates
Company Guidance
Management guided to maintain the current dividend policy (regular monthly dividends totaling $0.58 for Jan–Mar plus a $0.06 supplemental in March, i.e., $0.64 for March) and signaled continued ability to pay supplemental distributions given undistributed taxable income of $1.02/share and $0.76/share of unrealized appreciation; balance‑sheet and capital targets include regulatory leverage of 0.8–0.95x (ended the quarter at 0.89x), a near‑term operating‑leverage target ≤1.5% (LTM 1.7%, run‑rate 1.4% ex one‑time), and robust liquidity (~$438M cash/undrawn lines + $20M SBA, providing >1.5× coverage of $285M unfunded commitments). They expect loan spreads to remain roughly 7.0–7.25% over the next 12 months (new‑deal spread this quarter ~6.4–6.5%; portfolio spread down from 7.35% on 3/31/25 to ~7.24% today), plan to preserve portfolio granularity (~0.9% average exposure per company), conservative underwriting (new platform senior leverage ~3.0x–3.3x, LTV ~36–37%), and current portfolio metrics (credit portfolio yield ~11.3%, portfolio leverage ~3.6x EBITDA, cash‑flow coverage ~3.4x, 99% first‑lien, ~90–93% sponsor‑backed, nonaccruals 1.5%); they also expect the new first‑out JV (each party initially committing $50M, ~$300M credit facility target) to ramp over ~a year and ultimately deliver low‑ to mid‑teens equity returns while enabling continued opportunistic ATM equity issuance (historical ~$30–50M/quarter; recent $53M at $21.11/share).Capital Southwest Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
67
Positive
Cash Flow
28
Negative
| Breakdown | TTM | Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 214.05M | 163.81M | 152.15M | 90.33M | 102.93M | 72.58M |
| Gross Profit | 149.51M | 108.85M | 109.06M | 61.45M | 83.00M | 72.58M |
| EBITDA | 121.85M | 85.28M | 88.91M | 42.82M | 49.07M | 57.53M |
| Net Income | 103.08M | 70.55M | 83.39M | 33.09M | 42.81M | 50.88M |
Balance Sheet | ||||||
| Total Assets | 2.12B | 1.88B | 1.56B | 1.26B | 973.96M | 735.58M |
| Cash, Cash Equivalents and Short-Term Investments | 42.56M | 43.22M | 32.27M | 21.59M | 11.43M | 31.61M |
| Total Debt | 414.84M | 956.07M | 770.85M | 637.64M | 528.59M | 381.30M |
| Total Liabilities | 1.12B | 999.21M | 801.08M | 667.28M | 553.09M | 399.33M |
| Stockholders Equity | 995.63M | 883.63M | 755.68M | 590.41M | 420.87M | 336.25M |
Cash Flow | ||||||
| Free Cash Flow | -68.69M | -218.92M | -188.51M | -227.38M | -184.67M | -184.67M |
| Operating Cash Flow | -69.73M | -217.26M | -188.50M | -227.10M | -182.68M | -182.68M |
| Investing Cash Flow | -124.00M | -1.67M | -13.00K | -281.00K | -2.00M | -2.00M |
| Financing Cash Flow | 201.92M | 231.52M | 199.20M | 237.53M | 164.49M | 164.49M |
Capital Southwest Technical Analysis
Positive
23.13
Price Trends
22.28
Positive
21.88
Positive
21.24
Positive
Market Momentum
0.22
Negative
63.88
Neutral
89.57
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CSWC, the sentiment is Positive. The current price of 23.13 is above the 20-day moving average (MA) of 22.13, above the 50-day MA of 22.28, and above the 200-day MA of 21.24, indicating a bullish trend. The MACD of 0.22 indicates Negative momentum. The RSI at 63.88 is Neutral, neither overbought nor oversold. The STOCH value of 89.57 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CSWC.
Capital Southwest Risk Analysis
Capital Southwest disclosed 60 risk factors in its most recent earnings report. Capital Southwest reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Capital Southwest Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $1.37B | 9.68 | 11.18% | 11.90% | 25.28% | -1.69% | |
72 Outperform | $817.99M | 9.13 | 8.72% | 13.18% | -26.08% | -27.65% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
67 Neutral | $1.26B | 7.49 | 14.09% | 13.53% | 33.44% | 25.22% | |
66 Neutral | $1.01B | 8.99 | 8.03% | 17.34% | -16.58% | 65.24% | |
61 Neutral | $805.44M | 59.29 | 1.29% | 14.17% | 36.15% | -38.59% | |
60 Neutral | $772.50M | 12.09 | 5.87% | 13.63% | -8.23% | -35.72% |
* Financial Sector Average
CSWC
Capital Southwest
23.72
6.15
35.02%
NMFC
New Mountain Finance
8.22
-0.02
-0.30%
GSBD
Goldman Sachs BDC
9.46
0.68
7.72%
CGBD
Carlyle Secured Lending Inc
11.44
-1.06
-8.51%
BCSF
Bain Capital Specialty Finance
13.01
0.21
1.65%
TRIN
Trinity Capital
15.50
2.95
23.48%
Capital Southwest Corporate Events
Business Operations and StrategyDividends
Capital Southwest Declares Q2 2026 Dividends and Supplemental Payout
Positive
Feb 25, 2026
On February 25, 2026, Capital Southwest Corporation announced that its board declared monthly regular dividends of $0.1934 per share for April, May and June 2026 and a quarterly supplemental dividend of $0.06 per share payable on June 30, 2026. Th...
Business Operations and StrategyDividendsFinancial DisclosuresPrivate Placements and Financing
Capital Southwest Reports Strong Fiscal Q3 2026 Results
Positive
Feb 2, 2026
On February 2, 2026, Capital Southwest reported results for its third fiscal quarter ended December 31, 2025, highlighted by a $2.0 billion total investment portfolio, of which $1.8 billion was in credit investments with 99% in first-lien senior s...
DividendsRegulatory Filings and Compliance
Capital Southwest Confirms Final 2025 Dividend Tax Treatment
Neutral
Jan 30, 2026
On January 30, 2026, Capital Southwest Corporation announced the final U.S. federal income tax treatment of its 2025 dividends, confirming that the $2.56 per share in dividends attributable to the tax year ended December 31, 2025 were classified a...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.