Capital Southwest (CSWC) AI Stock Analysis

• Market Cap: $1.24B
• Dividend Yield: 11.86%
• Average Volume (3M): 567.60K
• Price to Earnings (P/E): 13.9
• Beta (1Y): 0.64
• Revenue Growth: 25.28%
• EPS Growth: -1.69%
• Country: US
• Employees: 27
• Sector: Financial
• Sector Strength: 70
• Industry: Asset Management
• EPS (TTM): 0.57
• Shares Outstanding: 57,467,000
• 10 Day Avg. Volume: 588,181
• 30 Day Avg. Volume: 567,602
• PEG Ratio: -0.53
• Price to Book (P/B): 1.20
• Price to Sales (P/S): 6.71
• P/FCF Ratio: -4.87
• Enterprise Value/Market Cap: 1.91
• Enterprise Value/Revenue: 12.24
• Enterprise Value/Gross Profit: 17.91
• Enterprise Value/Ebitda: 21.85
• 1Y Price Target: $22.13
• Price Target Upside: 2.93% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 5
• EPS Forecast (FY): 2.33
• Revenue Forecast (FY): $229.68M

• Rating: 68 Neutral
• Price Target: $24.00 ▲(11.63% Upside)

Capital Southwest's overall stock score is driven by strong profitability and attractive valuation, despite technical indicators suggesting potential price pullback. The earnings call provided positive insights into strategic initiatives, although challenges like negative cash flows and spread compression remain.

Positive Factors

Strong Portfolio Performance

The significant growth in the credit portfolio indicates robust demand for Capital Southwest's financial products, enhancing long-term revenue potential and market position.

Successful Capital Raising

The successful capital raising strengthens the balance sheet, providing financial flexibility to support future growth initiatives and strategic investments.

High Dividend Coverage

Consistent dividend coverage reflects strong cash generation and commitment to shareholder returns, enhancing investor confidence and long-term appeal.

Negative Factors

Spread Compression

Spread compression can pressure margins, potentially impacting profitability and limiting the company's ability to generate higher returns on new investments.

Nonaccrual Loans

Nonaccrual loans indicate credit quality concerns, which could lead to increased risk and potential losses, affecting the company's financial stability.

Negative Cash Flows

Negative cash flows can strain liquidity and limit the company's ability to invest in growth opportunities, impacting long-term financial health.

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

Capital Southwest demonstrates strong profitability with a high gross profit margin and positive revenue growth. However, challenges with negative cash flows and a moderate return on equity limit the financial performance score.

Income Statement

Capital Southwest shows strong profitability with a high gross profit margin of 90.18% and a solid net profit margin of 45.50% for TTM. Revenue growth is positive at 6.72% TTM, indicating a healthy upward trend. However, the gross profit margin has decreased from the previous year, suggesting potential cost pressures.

Balance Sheet

The company's debt-to-equity ratio has improved to 0.43 TTM from 1.08 the previous year, indicating better leverage management. Return on equity is moderate at 9.76%, reflecting decent profitability. However, the equity ratio is not explicitly provided, which limits a full assessment of financial stability.

Cash Flow

Cash flow metrics indicate challenges, with negative operating cash flow and free cash flow. The free cash flow to net income ratio is slightly above 1, suggesting cash flow issues relative to earnings. Despite a 21.15% growth in free cash flow, the negative cash flow remains a concern.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	193.44M	163.81M	152.15M	90.33M	102.93M	72.58M
Gross Profit	132.24M	108.85M	109.06M	61.45M	83.00M	72.58M
EBITDA	108.35M	85.28M	88.91M	42.82M	49.07M	57.53M
Net Income	86.45M	70.55M	83.39M	33.09M	42.81M	50.88M
Balance Sheet
Total Assets	2.02B	1.88B	1.56B	1.26B	973.96M	735.58M
Cash, Cash Equivalents and Short-Term Investments	87.43M	43.22M	32.27M	21.59M	11.43M	31.61M
Total Debt	394.76M	956.07M	770.85M	637.64M	528.59M	381.30M
Total Liabilities	1.07B	999.21M	801.08M	667.28M	553.09M	399.33M
Stockholders Equity	947.00M	883.63M	755.68M	590.41M	420.87M	336.25M
Cash Flow
Free Cash Flow	-269.13M	-217.26M	-188.51M	-227.38M	-184.67M	-184.67M
Operating Cash Flow	-269.43M	-217.26M	-188.50M	-227.10M	-182.68M	-182.68M
Investing Cash Flow	2.78M	-1.67M	-13.00K	-281.00K	-2.00M	-2.00M
Financing Cash Flow	308.49M	231.52M	199.20M	237.53M	164.49M	164.49M

Capital Southwest Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 21.50
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

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 21.5 is below the 20-day moving average (MA) of 21.55, above the 50-day MA of 20.67, and above the 200-day MA of 20.45, indicating a bullish trend. The MACD of 0.29 indicates Positive momentum. The RSI at 55.86 is Neutral, neither overbought nor oversold. The STOCH value of 5.87 is Positive, 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
TRIN	76 Outperform	$1.14B	6.90	16.18%	13.53%	33.44%	25.22%
GSBD	71 Outperform	$1.10B	8.44	8.75%	17.23%	-16.58%	65.24%
CSWC	68 Neutral	$1.24B	13.89	9.80%	11.86%	25.28%	-1.69%
BCSF	68 Neutral	$901.02M	9.66	8.18%	12.96%	-26.08%	-27.65%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
CGBD	67 Neutral	$912.75M	10.88	7.03%	13.58%	-8.23%	-35.72%
NMFC	66 Neutral	$929.43M	13.81	5.43%	14.21%	36.15%	-38.59%

Capital Southwest Corporate Events

Capital Southwest Declares Dividends for Early 2026

On November 19, 2025, Capital Southwest Corporation announced its Board of Directors declared monthly regular dividends of $0.1934 per share for January, February, and March 2026, along with a quarterly supplemental dividend of $0.06 per share payable in March 2026. The total dividends per share for the quarter ending March 31, 2026, amount to $0.64. This announcement reflects the company’s commitment to providing returns to its shareholders and may impact its financial planning and stakeholder expectations for the upcoming fiscal period.

Capital Southwest Reports Strong Q2 2025 Financial Results

Capital Southwest Corporation announced its financial results for the second fiscal quarter ended September 30, 2025, highlighting a total investment portfolio of $1.9 billion and a pre-tax net investment income of $34.0 million. The company reported significant origination activity with $245.5 million in new commitments and raised $350 million through an unsecured bond transaction, which was used to redeem existing notes. The company also declared regular and supplemental dividends for the quarter, reflecting strong financial performance and strategic capital management.

Capital Southwest Completes $350 Million Notes Offering

On September 18, 2025, Capital Southwest Corporation completed a public offering of $350 million in 5.950% Notes due 2030, with the transaction closing on the same day. The company plans to use the net proceeds of approximately $343.6 million to redeem outstanding notes and repay portions of its credit facilities, which may impact its financial structure by reducing higher-interest debt obligations.