Capital Southwest (CSWC) AI Stock Analysis

• Market Cap: $1.36B
• Dividend Yield: 11.9%
• Average Volume (3M): 606.31K
• Price to Earnings (P/E): 12.6
• Beta (1Y): 0.69
• Revenue Growth: 25.28%
• EPS Growth: -1.69%
• Country: US
• Employees: 27
• Sector: Financial
• Sector Strength: 70
• Industry: Asset Management
• EPS (TTM): 0.64
• Shares Outstanding: 60,162,020
• 10 Day Avg. Volume: 528,035
• 30 Day Avg. Volume: 606,309
• PEG Ratio: -0.53
• Price to Book (P/B): 1.20
• Price to Sales (P/S): 6.46
• P/FCF Ratio: -4.87
• Enterprise Value/Market Cap: 1.25
• Enterprise Value/Revenue: 7.89
• Enterprise Value/Gross Profit: 11.29
• Enterprise Value/Ebitda: 13.85
• 1Y Price Target: $24.00
• Price Target Upside: 5.31% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 1
• EPS Forecast (FY): 2.38
• Revenue Forecast (FY): $235.06M

• Rating: 72 Outperform
• Price Target: $25.00 ▲(9.70% Upside)
• Action: Reiterated Date: 02/26/26
• Date: Action: Reiterated 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.

Improving leverage and balance-sheet flexibility

Material de‑leverage versus prior years meaningfully increases financial flexibility to fund originations, withstand shocks, and access credit. Lower leverage reduces refinancing and covenant risk, enabling steadier dividends and measured growth over the next several quarters.

Strong recurring earnings and ample taxable income

Elevated UTI and recent realized gains create a durable cushion to support regular and supplemental distributions. For a BDC that must distribute earnings, persistent UTI provides structural capacity to sustain payouts and retain investor confidence across the coming quarters.

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.

Spread compression and competitive pressure

Persistently tighter spreads limit margin expansion on new originations and cap NII growth even as portfolio expands. Structurally, prolonged competition from banks and nonbanks can pressure yields and returns, constraining earnings improvement over the medium term.

Sector concentration and higher leverage in consumer verticals

A large allocation to cyclical consumer sectors with above‑average leverage heightens portfolio vulnerability to an economic slowdown. Over 2–6 months, consumer stress could drive higher delinquencies or restructurings, pressuring earnings and NAV more than a broadly diversified mix would.

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 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 rates. Additionally, CSWC derives income from fees associated with structuring and managing its investments, including origination fees and exit fees. Equity investments also contribute to revenue through dividends and capital gains when portfolio companies experience growth and increase in value. Strategic partnerships with investment firms and financial institutions further enhance its deal flow and investment opportunities, contributing to overall earnings.

Capital Southwest Financial Statement Overview

Summary

Profitability is strong (income statement score 78) and leverage has improved meaningfully in TTM (balance sheet score 67), but persistent negative operating and free cash flow (cash flow score 28) is a material risk and keeps overall financial quality mixed.

Income Statement

CSWC shows strong profitability with consistently high margins and solid TTM (Trailing-Twelve-Months) revenue growth (+10.3%). However, growth has been uneven across annual periods (including a down year in 2023), and profitability appears to have moderated from prior peaks (net margin ~44.7% in TTM vs. higher levels in some earlier annual results).

Balance Sheet

Leverage looks improved in TTM, with debt-to-equity down to ~0.42 versus ~1.0–1.26 in prior annual periods, which strengthens balance-sheet flexibility. Total assets and equity have also grown over time. The key watch-out is that the capital structure has historically run with higher leverage, and returns on equity are solid but not consistently rising (TTM ROE ~9.9% vs. a wide range historically).

Cash Flow

Cash generation is the main weakness: operating cash flow and free cash flow are negative in TTM and across all annual periods provided (TTM operating cash flow about -$69.7M; TTM free cash flow about -$68.7M). Free cash flow growth is sharply negative in TTM, indicating worsening cash usage versus the prior period. Despite strong reported earnings, the company has not been converting profits into positive cash flow in the periods shown, which increases funding and liquidity sensitivity.

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	-217.26M	-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

• Technical Analysis Sentiment: Positive
• Last Price: 22.79
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

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 22.79 is below the 20-day moving average (MA) of 22.94, above the 50-day MA of 22.51, and above the 200-day MA of 20.99, indicating a neutral trend. The MACD of 0.04 indicates Positive momentum. The RSI at 50.33 is Neutral, neither overbought nor oversold. The STOCH value of 45.55 is Neutral, 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	72 Outperform	$1.36B	12.59	11.11%	11.90%	25.28%	-1.69%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
GSBD	66 Neutral	$1.04B	8.02	8.75%	17.34%	-16.58%	65.24%
TRIN	66 Neutral	$1.14B	6.87	14.15%	13.53%	33.44%	25.22%
BCSF	62 Neutral	$852.37M	9.14	8.18%	13.18%	-26.08%	-27.65%
NMFC	61 Neutral	$841.75M	59.91	1.30%	14.17%	36.15%	-38.59%
CGBD	60 Neutral	$834.74M	11.30	6.74%	13.63%	-8.23%	-35.72%

Capital Southwest Corporate Events

Capital Southwest Declares Q2 2026 Dividends and Supplemental Payout

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. The total regular dividends for the quarter ending June 30, 2026 amount to $0.58 per share, bringing total dividends for the quarter, including the supplemental payout tied to the March 31, 2026 quarter, to $0.64 per share, and these distributions, alongside the company’s dividend reinvestment plan, underscore its continued emphasis on returning capital to shareholders while basing payouts on estimates of taxable income.

When declaring these dividends, the board reviews estimates of taxable income available for distribution, which may differ from net investment income under generally accepted accounting principles. The company’s dividend reinvestment plan allows registered shareholders who elect participation by the record date to automatically reinvest their dividends into additional Capital Southwest common shares, a mechanism that can support incremental capital formation and signal confidence in the stability of its income-generating lending portfolio.

The most recent analyst rating on (CSWC) stock is a Buy with a $24.00 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.

Capital Southwest Reports Strong Fiscal Q3 2026 Results

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 secured debt and $182.7 million in equity. The company generated pre-tax net investment income of $34.6 million, or $0.60 per share, maintained low non-accruals at 1.5% of the portfolio by fair value, and paid total dividends of $0.64 per share for the quarter, including regular monthly and supplemental payouts, while NAV per share inched up to $16.75, supported by equity issuance at a premium and net appreciation on investments. Activity remained robust with $244 million in new commitments across eight new and 16 existing portfolio companies, $89.1 million in repayments and exits, and a modest $1.9 million in net realized and unrealized depreciation; management also disclosed that it raised about $53 million via its equity ATM program and, after quarter-end, formed a joint venture with a private credit manager to pursue off-balance-sheet first-out senior secured debt opportunities in the lower middle market, enhancing its ability to compete for a broader range of deals. Liquidity remained solid at quarter-end, with $42.6 million in cash, $395.2 million of unused borrowing capacity, and a regulatory debt-to-equity ratio of 0.89 to 1, underpinned by expanded and extended corporate and SPV credit facilities and a diversified stack of convertible notes, unsecured notes and SBA debentures.

The most recent analyst rating on (CSWC) stock is a Buy with a $24.50 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.

Capital Southwest Confirms Final 2025 Dividend Tax Treatment

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 as 100% ordinary income, including net short-term capital gains. Of this ordinary income, 73.89% is taxed as ordinary income and 26.11% as qualified dividends, a breakdown that will guide shareholders’ tax reporting and supersedes prior estimates for 2025. The company also highlighted that approximately 82.55% of its 2025 dividends relate to interest and short-term capital gains, information that is particularly relevant for non-U.S. shareholders in assessing potential exemptions from U.S. withholding tax and any related refund claims with the Internal Revenue Service.

The most recent analyst rating on (CSWC) stock is a Buy with a $24.50 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.