Capital Southwest (CSWC) AI Stock Analysis

• Market Cap: $1.24B
• Dividend Yield: 10.72%
• Average Volume (3M): 620.80K
• 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: 640,955
• 30 Day Avg. Volume: 620,801
• 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: 2.83% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 5
• EPS Forecast (FY): 2.33
• Revenue Forecast (FY): $229.68M

• Rating: 65 Neutral
• Price Target: $22.00 ▲(2.23% Upside)

Capital Southwest's strong earnings call performance and attractive dividend yield are significant positives. However, financial performance is tempered by negative cash flows and technical indicators suggest a lack of strong momentum. Overall, the stock presents a balanced risk-reward profile with potential for income-focused investors.

Positive Factors

Strong Portfolio Performance

The significant growth in the credit portfolio indicates robust demand and effective investment strategies, enhancing long-term revenue potential.

Successful Capital Raising

This capital raising strengthens the balance sheet, improves financial flexibility, and addresses near-term debt maturities, supporting sustainable growth.

High Dividend Coverage

Consistent dividend coverage reflects strong cash generation ability and commitment to returning value to shareholders, enhancing investor confidence.

Negative Factors

Spread Compression

Spread compression due to competitive pressures could impact profitability, as lower spreads reduce interest income from new loans.

Nonaccrual Loans

Nonaccrual loans indicate credit quality issues, which can lead to potential losses and reduced income, affecting financial stability.

Yield Reduction

A decrease in yield reduces income from the credit portfolio, which could pressure margins and affect overall profitability.

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 revenue and profit growth, supported by efficient operations and improved leverage. However, cash flow challenges and historical high leverage require careful management to sustain growth and stability. The company is on a positive trajectory but must address liquidity risks to maintain financial health.

Income Statement

Capital Southwest shows strong revenue growth with a TTM revenue growth rate of 29.33%, indicating a positive trajectory. The gross profit margin is robust at 90.18%, and the net profit margin is healthy at 45.50%. EBIT and EBITDA margins are also strong, reflecting efficient operations. However, the high gross profit margin in the previous annual report suggests potential volatility.

Balance Sheet

The company's debt-to-equity ratio improved significantly in the TTM period to 0.43 from 1.09, indicating better leverage management. Return on equity is moderate at 9.76%, suggesting decent profitability. The equity ratio is not explicitly calculated but appears stable given the asset growth. However, the historical high leverage poses a risk if not managed carefully.

Cash Flow

Cash flow metrics indicate challenges, with negative operating and free cash flows. The free cash flow to net income ratio is slightly above 1, suggesting cash flow issues despite profitability. The TTM free cash flow growth rate is positive, but the overall cash flow position remains weak, highlighting potential liquidity concerns.

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: 21.52
• 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 21.52 is above the 20-day moving average (MA) of 20.67, above the 50-day MA of 20.77, and above the 200-day MA of 20.60, indicating a bullish trend. The MACD of 0.20 indicates Negative momentum. The RSI at 64.92 is Neutral, neither overbought nor oversold. The STOCH value of 93.64 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	74 Outperform	$1.12B	6.76	16.18%	13.77%	33.44%	25.22%
GSBD	71 Outperform	$1.14B	8.78	8.75%	16.85%	-16.58%	65.24%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
CGBD	67 Neutral	$922.22M	10.99	7.03%	14.19%	-8.23%	-35.72%
NMFC	66 Neutral	$997.52M	14.82	5.43%	13.40%	36.15%	-38.59%
CSWC	65 Neutral	$1.24B	13.85	9.80%	10.72%	25.28%	-1.69%
BCSF	63 Neutral	$929.57M	9.96	8.18%	12.56%	-26.08%	-27.65%

Capital Southwest Corporate Events

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.

The most recent analyst rating on (CSWC) stock is a Hold with a $22.00 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.

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.

The most recent analyst rating on (CSWC) stock is a Buy with a $25.00 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.

Capital Southwest Redeems Notes, Alters Debt Structure

Capital Southwest Corporation announced on September 9, 2025, that it entered into an underwriting agreement with several financial institutions for the issuance and sale of $350 million in 5.950% Notes due 2030. The offering is expected to close on September 18, 2025, pending customary conditions. Additionally, on September 11, 2025, the company issued notices to redeem its 3.375% Notes due 2026 and 7.75% Notes due 2028, with redemptions scheduled for October 13, 2025. These financial maneuvers indicate a strategic shift in the company’s debt structure, potentially impacting its financial stability and stakeholder interests.

The most recent analyst rating on (CSWC) stock is a Buy with a $25.00 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.

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.

The most recent analyst rating on (CSWC) stock is a Buy with a $26.00 price target. To see the full list of analyst forecasts on Capital Southwest stock, see the CSWC Stock Forecast page.

Capital Southwest’s Earnings Call Highlights Strong Performance

In the recent earnings call, Capital Southwest showcased a strong performance, marked by significant achievements in financial management, dividend increases, and successful expansions in capitalization. Despite facing competitive pressures on loan spreads and a slight decline in NAV per share, the overall sentiment was positive, reflecting the company’s robust financial health and strategic initiatives.

Capital Southwest Reports Strong Q1 2026 Earnings

Capital Southwest Corporation is a Dallas-based, internally managed business development company that specializes in providing flexible financing solutions to support the acquisition and growth of middle market businesses. The company operates primarily in the financial services sector, with a focus on middle market lending.

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.

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.