Capital Southwest (CSWC) AI Stock Analysis

• Market Cap: $1.28B
• Dividend Yield: 10.07%
• Average Volume (3M): 571.63K
• Price to Earnings (P/E): 14.4
• Beta (1Y): 0.58
• Revenue Growth: 12.82%
• EPS Growth: -5.37%
• Country: US
• Employees: 27
• Sector: Financial
• Sector Strength: 78
• Industry: Asset Management
• EPS (TTM): 0.59
• Shares Outstanding: 55,628,456
• 10 Day Avg. Volume: 516,457
• 30 Day Avg. Volume: 571,628
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.77
• Enterprise Value/Revenue: 15.97
• Enterprise Value/Gross Profit: 12.74
• Enterprise Value/Ebitda: 14.55
• 1Y Price Target: $24.13
• Price Target Upside: 5.10% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 4

• Rating: 74 Outperform
• Price Target: $25.00 ▲(8.89% Upside)

Capital Southwest's strong financial performance and attractive valuation are the most significant factors driving the score. The positive earnings call further supports the company's strategic direction and financial health. However, concerns about cash flow management and competitive pressures slightly temper the overall outlook.

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 generates revenue primarily through interest income from its debt investments and capital gains from its equity investments in portfolio companies. The company typically provides loans in the form of senior secured debt, subordinated debt, or equity co-investments, which yield interest payments that contribute to its revenue stream. Additionally, CSWC earns management fees from its investment activities and may receive incentive fees based on the performance of its investments. The company focuses on building long-term relationships with its portfolio companies, often engaging in follow-on investments as these companies grow. Key partnerships with financial advisors, business owners, and industry experts also enhance its deal flow and investment opportunities, thereby contributing to its overall earnings potential.

Capital Southwest Financial Statement Overview

Summary

Capital Southwest shows strong revenue growth and profitability with efficient cost management. However, cash flow management is a concern due to negative free cash flow and reliance on external financing. The balance sheet is stable but leveraged, indicating potential 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	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	141.92M	157.73M	138.53M	90.33M	83.00M	72.58M
Gross Profit	177.87M	204.44M	109.06M	58.70M	80.77M	72.58M
EBITDA	155.74M	140.64M	88.91M	71.69M	65.46M	57.53M
Net Income	70.55M	70.55M	83.39M	33.09M	42.81M	50.88M
Balance Sheet
Total Assets	1.88B	1.88B	1.56B	1.26B	973.96M	735.58M
Cash, Cash Equivalents and Short-Term Investments	43.22M	43.22M	32.27M	21.59M	11.43M	31.61M
Total Debt	961.47M	961.47M	774.05M	637.64M	528.59M	381.30M
Total Liabilities	999.21M	999.21M	801.08M	667.28M	553.09M	399.33M
Stockholders Equity	883.63M	883.63M	755.68M	590.41M	420.87M	336.25M
Cash Flow
Free Cash Flow	-221.40M	-217.26M	-188.51M	-227.38M	-184.67M	-68.25M
Operating Cash Flow	-221.40M	-217.26M	-188.50M	-227.10M	-182.68M	-68.25M
Investing Cash Flow	2.48M	-1.67M	-13.00K	-281.00K	-2.00M	-103.92M
Financing Cash Flow	231.52M	231.52M	199.20M	237.53M	164.49M	86.12M

Capital Southwest Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 22.96
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• 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 22.96 is above the 20-day moving average (MA) of 22.58, above the 50-day MA of 22.46, and above the 200-day MA of 20.88, indicating a bullish trend. The MACD of 0.11 indicates Negative momentum. The RSI at 56.71 is Neutral, neither overbought nor oversold. The STOCH value of 85.19 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
TRIN	80 Outperform	$1.14B	7.26	17.31%	12.58%	31.43%	30.85%
CSWC	74 Outperform	$1.28B	14.43	9.74%	10.07%	12.82%	-5.37%
SLRC	71 Outperform	$906.70M	10.21	8.95%	9.85%	5.87%	-12.64%
Sector *	68 Neutral	$17.95B	11.54	10.27%	3.74%	9.64%	1.17%
BCSF	66 Neutral	$1.03B	9.52	9.42%	11.38%	-3.29%	-16.86%
NMFC	65 Neutral	$1.13B	14.09	6.18%	12.43%	39.05%	-32.62%
PFLT	63 Neutral	$1.02B	12.05	7.37%	12.08%	55.25%	-47.71%

Capital Southwest Corporate Events

Capital Southwest Declares Monthly and Supplemental Dividends

On August 27, 2025, Capital Southwest Corporation announced its Board of Directors declared monthly regular dividends of $0.1934 per share for October, November, and December 2025, along with a quarterly supplemental dividend of $0.06 per share payable in December 2025. This decision reflects the company’s commitment to providing returns to its shareholders and maintaining a stable dividend policy, which could positively impact its market positioning and stakeholder confidence.

Capital Southwest Announces Q1 2025 Financial Results

On August 6, 2025, Capital Southwest announced its financial results for the first fiscal quarter ended June 30, 2025. The company reported a total investment portfolio of $1.8 billion, with a credit portfolio of $1.6 billion and an equity portfolio of $166.2 million. The quarter saw $113.4 million in new committed credit investments and $1.8 million in new equity co-investments. Pre-tax net investment income was $32.7 million, and the company paid a total of $0.64 per share in dividends. The results reflect a strengthening balance sheet and a conservative underwriting approach, with non-accruals representing less than 1% of the portfolio. The company also announced a change in its dividend payment frequency from quarterly to monthly, aiming to enhance shareholder value.

Capital Southwest Holds 2025 Annual Shareholder Meeting

On July 24, 2025, Capital Southwest Corporation held its 2025 Annual Meeting of Shareholders, where shareholders voted on several key proposals. These included the election of six directors, approval of executive compensation, an amendment to the 2021 Employee Restricted Stock Award Plan, and the ratification of RSM US LLP as the independent accounting firm for the fiscal year ending March 31, 2026. The successful approval of these proposals indicates continued shareholder support for the company’s strategic direction and governance, potentially impacting its operational and financial strategies positively.

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.