Capital Southwest (CSWC) AI Stock Analysis

• Market Cap: $1.21B
• Dividend Yield: 11.62%
• Average Volume (3M): 561.61K
• Price to Earnings (P/E): 15.1
• Beta (1Y): 0.55
• Revenue Growth: 13.86%
• EPS Growth: -29.53%
• Country: US
• Employees: 27
• Sector: Financial
• Sector Strength: 79
• Industry: Asset Management
• EPS (TTM): 0.54
• Shares Outstanding: 54,816,880
• 10 Day Avg. Volume: 693,825
• 30 Day Avg. Volume: 561,609
• PEG Ratio: -0.39
• Price to Book (P/B): 0.90
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -2.35
• Enterprise Value/Market Cap: 0.95
• Enterprise Value/Revenue: 1.73
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: 2.91
• 1Y Price Target: $22.83
• Price Target Upside: 3.30% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 3

• Rating: 77 Outperform
• Price Target: $24.00 ▲(8.60%Upside)

Capital Southwest demonstrates strong financial performance with robust profitability and strategic growth. The high dividend yield and positive earnings call sentiment further enhance its appeal. However, cash flow challenges and leveraged balance sheet pose risks that require attention.

Positive Factors

Earnings

Capital Southwest reported solid earnings with interest and dividend income totaling $47M, and fee income rising significantly compared to the previous quarter.

Investment Portfolio

The investment portfolio increased 13% sequentially to $1.70B, driven by strong originations, which is a positive indication of growth.

Negative Factors

Base Rates and Yields

Lower base rates are putting downward pressure on portfolio yields, which is a challenge for CSWC.

Market Competition

Competition across the industry remains fierce, putting pressure on spreads in the direct lending market.

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, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. It prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States. The firm seeks to make investments ranging from $5 to $25 million in securities. It seeks to make equity investments ranging from $5 million to $50 million and debt investments between $5 million and $20 million and co-invest in transaction size up to $40 million. It prefers to invest in companies with revenues approaching above $10 million, profitable operations, historical growth rate of at least 15 percent per year. Within the lower middle market, it seeks to invest in with less than $15 million in EBITDA and also opportunistically invests in the upper middle market, generally defined as companies with EBITDA in excess of $50 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.

How the Company Makes Money

Capital Southwest makes money through interest income from its debt investments and capital gains from its equity investments. The company generates revenue by providing loans and making equity investments in small to mid-sized businesses, which pay interest or dividends back to CSWC. Additionally, the firm may realize capital gains when it exits equity investments at a higher valuation. CSWC manages its portfolio to maintain a balance between risk and return, often partnering with other financial institutions to diversify risk and enhance deal flow. The company's revenue is significantly influenced by the performance of its portfolio companies, market interest rates, and overall economic conditions.

Capital Southwest Financial Statement Overview

Summary

Capital Southwest shows strong revenue and profitability growth with effective cost management. However, cash flow challenges and reliance on external financing are significant concerns. The balance sheet is stable but leveraged, which could pose risks if financial conditions worsen.

Income Statement

Capital Southwest has shown impressive revenue growth with a significant increase from 2024 to 2025. The gross and net profit margins are strong, indicating efficient management of costs relative to revenues. EBIT and EBITDA margins are also robust, reflecting effective operational control. However, the historical volatility in revenue growth may denote potential challenges in sustaining this trajectory.

Balance Sheet

The company maintains a moderate debt-to-equity ratio, suggesting a balanced approach to leveraging debt and equity. The return on equity is commendable, indicating solid profitability for shareholders. The equity ratio implies a stable asset financing structure, yet the relatively high liabilities compared to equity could pose risks if financial conditions worsen.

Cash Flow

Capital Southwest faces challenges in cash flow management, with negative operating and free cash flows indicating potential liquidity issues. The operating cash flow to net income ratio shows inconsistency, suggesting a need for improved cash generation efficiency. Positive financing cash flow reflects reliance on external funding, which might not be sustainable long-term.

Breakdown	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	204.44M	138.53M	90.33M	83.00M	72.58M
Gross Profit	204.44M	109.06M	58.70M	80.77M	72.58M
EBITDA	181.27M	88.91M	71.69M	65.46M	57.53M
Net Income	118.18M	83.39M	33.09M	42.81M	50.88M
Balance Sheet
Total Assets	1.88B	1.56B	1.26B	973.96M	735.58M
Cash, Cash Equivalents and Short-Term Investments	43.22M	32.27M	21.59M	11.43M	31.61M
Total Debt	394.02M	774.05M	637.64M	528.59M	381.30M
Total Liabilities	999.21M	801.08M	667.28M	553.09M	399.33M
Stockholders Equity	883.63M	755.68M	590.41M	420.87M	336.25M
Cash Flow
Free Cash Flow	-217.26M	-188.51M	-227.38M	-184.67M	-68.25M
Operating Cash Flow	-217.26M	-188.50M	-227.10M	-182.68M	-68.25M
Investing Cash Flow	-1.67M	-13.00K	-281.00K	-2.00M	-103.92M
Financing Cash Flow	231.52M	199.20M	237.53M	164.49M	86.12M

Capital Southwest Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 22.10
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: 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 22.1 is above the 20-day moving average (MA) of 21.02, above the 50-day MA of 20.34, and above the 200-day MA of 21.18, indicating a bullish trend. The MACD of 0.46 indicates Negative momentum. The RSI at 72.29 is Negative, neither overbought nor oversold. The STOCH value of 87.96 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CSWC.

Capital Southwest Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CSWC	77 Outperform	$1.21B	15.06	8.52%	11.62%	13.86%	-29.53%
TRIN	72 Outperform	$907.70M	6.41	17.56%	14.50%	46.14%	34.91%
SLRC	71 Outperform	$877.78M	10.00	8.86%	10.16%	14.33%	25.35%
PFLT	70 Outperform	$1.02B	11.42	7.59%	11.91%	93.63%	24.41%
Sector *	67 Neutral	$16.85B	11.65	9.71%	3.90%	11.61%	-9.60%
BCSF	66 Neutral	$969.78M	8.56	9.87%	11.97%	12.24%	-3.21%
NMFC	65 Neutral	$1.14B	10.69	8.11%	12.13%	-3.55%	-20.43%

Capital Southwest Corporate Events

Capital Southwest Shifts to Monthly Dividends

On June 11, 2025, Capital Southwest Corporation announced a transition from quarterly to monthly dividend payments, starting in July 2025. The company declared total dividends of $0.64 per share for the quarter ending September 30, 2025, which includes monthly regular dividends of $0.1934 per share for July, August, and September, and a supplemental dividend of $0.06 per share payable in September. This change is seen as a shareholder-friendly initiative, reflecting the company’s strong earnings and credit quality, and is expected to benefit all shareholders.

The most recent analyst rating on (CSWC) stock is a Buy with a $23.00 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.

Capital Southwest Reports Strong Q4 2025 Financial Results

Capital Southwest Corporation announced its financial results for the fourth fiscal quarter and year ended March 31, 2025. The company reported a total investment portfolio of $1.8 billion, with significant growth in both credit and equity portfolios. The firm generated a pre-tax net investment income of $28.5 million for the quarter and paid dividends totaling $0.64 per share. The company also increased its borrowing capacity and received a license to operate a second SBIC subsidiary, enhancing its access to cost-effective debt capital. These developments indicate a strong financial performance and strategic positioning for future growth.

The most recent analyst rating on (CSWC) stock is a Hold with a $21.00 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.

Capital Southwest Announces Regular and Supplemental Dividends

On April 28, 2025, Capital Southwest Corporation announced a regular dividend of $0.58 per share and a supplemental dividend of $0.06 per share for the quarter ending June 30, 2025. The dividends will be payable on June 30, 2025, with an ex-dividend date of June 13, 2025. This announcement reflects the company’s ongoing commitment to providing returns to its shareholders, supported by its dividend reinvestment plan, which allows registered stockholders to reinvest dividends into additional shares.