Oaktree Specialty Lending (OCSL) AI Stock Analysis

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Oaktree Specialty Lending

(NASDAQ:OCSL)

Rating:59Neutral

Price Target:―

Oaktree Specialty Lending's overall performance reflects a stable yet challenging financial landscape. The robust balance sheet and high dividend yield are key strengths, but operational inefficiencies and technical weakness present notable risks. The recent earnings call highlights strategic initiatives yet underscores ongoing challenges, contributing to a moderate overall stock score.

Positive Factors

Earnings

OCSL reported adjusted NOI of $0.55 per share, above the $0.53 estimate, helped by non-recurring items and discretionary incentive fee waivers.

Negative Factors

Credit Quality

The number of investments on non-accrual status increased, indicating ongoing credit quality issues.

Dividend Sustainability

Oaktree Specialty Lending Corp. has minimal cushion on its dividend coverage, raising concerns about sustainability.

Net Asset Value

Net asset value continues to decline, driven by significant unrealized and realized losses.

Oaktree Specialty Lending (OCSL) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$1.21B

Dividend Yield12.25%

Average Volume (3M)520.14K

Price to Earnings (P/E)107.2

Beta (1Y)0.52

Revenue Growth-37.81%

EPS Growth-90.29%

CountryUS

EmployeesN/A

SectorFinancial

Sector Strength76

IndustryFinancial - Credit Services

Share Statistics

EPS (TTM)0.45

Shares Outstanding88,085,526

10 Day Avg. Volume557,523

30 Day Avg. Volume520,139

Financial Highlights & Ratios

PEG Ratio-0.42

Price to Book (P/B)0.88

Price to Sales (P/S)0.00

P/FCF Ratio48.81

Enterprise Value/Market Cap1.95

Enterprise Value/Revenue3.58

Enterprise Value/Gross Profit260.76

Enterprise Value/Ebitda70.81

Forecast

1Y Price Target

$13.38

Price Target Upside-2.41% Downside

Rating ConsensusHold

Number of Analyst Covering4

Oaktree Specialty Lending Business Overview & Revenue Model

Company DescriptionOaktree Specialty Lending Corporation (OCSL) is a specialty finance company dedicated to providing customized capital solutions to middle-market companies across a variety of industries. Operating primarily within the financial services sector, OCSL is structured as a business development company (BDC) and focuses on offering flexible and tailored lending solutions. The company's core services include providing senior secured loans, mezzanine loans, and equity investments, aimed at helping businesses grow while generating attractive returns for its shareholders.

How the Company Makes MoneyOCSL makes money primarily through interest income generated from its portfolio of debt investments. As a BDC, the company lends capital to middle-market companies, charging interest on these loans, which serves as the main revenue stream. Additionally, OCSL may realize gains from equity investments, which can contribute to its earnings. The company also benefits from its strategic affiliation with Oaktree Capital Management, L.P., which provides management expertise and access to a broad network of industry contacts. This partnership can enhance deal flow and investment opportunities, ultimately supporting the company's revenue generation and growth.

Oaktree Specialty Lending Earnings Call Summary

Earnings Call Date:May 01, 2025

(Q2-2025)

% Change Since: -1.93%|

Next Earnings Date:Jul 31, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed sentiment. There were notable achievements in capital redeployment, dividend maintenance, and strategic refinancing efforts, showing positive operational management. However, these were offset by significant challenges, including increased non-accrual investments, decreased net investment income, and market volatility due to tariffs, creating a challenging financial environment.

Q2-2025 Updates

Positive Updates

Debt Repayment and Capital Redeployment

In April, Oaktree received nearly $100 million from debt repayments, all realized at small premiums compared to March valuations, allowing for capital redeployment into new income-generating investments.

Dividend Announcement

The board approved a base dividend of $0.40 per share and a variable supplemental dividend of $0.02 per share for the second quarter, aligned with the new dividend policy.

Successful Refinancing and Credit Facility Amendment

Issued new unsecured bonds maturing in 2030 and amended the senior secured revolving credit facility to extend maturity and reduce interest rates from SOFR plus 2% to a range of SOFR plus 1.75% to 1.875%.

Strong Investment Activity

Committed $407 million across 32 investments with a focus on senior secured loans, maintaining a diverse portfolio with 84% in senior secured loans and 81% in first lien loans.

Oaktree's Share Purchase and Management Fee Reduction

Oaktree purchased $100 million in OCSL shares and reduced the management fee to 1% on all assets to align interests with shareholders and enhance long-term earnings.

Negative Updates

Decrease in Adjusted Net Investment Income and Net Asset Value

Adjusted net investment income decreased to $39 million or $0.45 per share from $45 million or $0.54 per share in the previous quarter. Net asset value fell to $16.75 per share from $17.63.

Increased Non-Accrual Investments

Investments on non-accrual status rose to 4.6% of fair market value and 7.6% of cost, compared to 3.9% and 5.1% in the first quarter.

Significant Write-Downs

Mosaic Companies and SiO2 were moved to non-accrual status, resulting in write-downs of approximately 76% and 69%, respectively.

Challenges with Tariffs and Market Volatility

Increased market volatility and uncertainty due to tariffs impacting portfolio companies, with potential for further challenges in the coming quarters.

Company Guidance

During the second fiscal quarter of 2025, Oaktree Specialty Lending Corporation reported an adjusted net investment income of $39 million, or $0.45 per share, reflecting a decline from $45 million, or $0.54 per share, in the previous quarter. The net asset value decreased to $16.75 per share from $17.63 in the prior quarter. The portfolio's non-accrual status rose to 4.6% and 7.6% of fair market value and cost, respectively, compared to 3.9% and 5.1% in the first quarter. Despite challenges, the company made $407 million in capital commitments across 32 investments, with a weighted average yield of 9.5%. Oaktree successfully issued new unsecured bonds maturing in 2030 and amended its senior secured revolving credit facility to reduce interest rates. The board approved a base dividend of $0.40 per share and a variable supplemental dividend of $0.02 per share. The company's leverage ratio decreased to 0.93 times, providing ample liquidity for future investments.

Oaktree Specialty Lending Financial Statement Overview

Summary

Oaktree Specialty Lending shows a mixed financial performance. Strong gross profit margins indicate efficient cost management, but operational challenges are evident with a negative EBIT margin. The balance sheet is robust with no debt, providing stability, yet profitability is modest. Cash flow is strong in operations but inconsistent in free cash flow growth.

Income Statement

Neutral

Oaktree Specialty Lending shows a mixed financial performance. The TTM gross profit margin is strong at 84.81%, indicating efficient cost management. However, the net profit margin for TTM is modest at 23.97%, and a negative EBIT margin of -29.24% suggests operational challenges. Revenue growth is volatile, with a significant decline in the latest annual report, indicating potential revenue instability.

Balance Sheet

Positive

The company's balance sheet is robust with no debt, resulting in a favorable debt-to-equity ratio of 0. The equity ratio is stable at around 47%, indicating a solid equity base. However, the return on equity is relatively low at 3.77% TTM, suggesting limited profitability relative to equity.

Cash Flow

Neutral

Oaktree Specialty Lending's cash flow statement reveals strong operating cash flow with an impressive operating cash flow to net income ratio of 5.89 for TTM. However, free cash flow growth is inconsistent, with a significant drop in the latest annual report, indicating potential cash flow management issues.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
100.21M	57.61M	379.29M	39.11M	248.31M	52.31M
	Gross Profit
9.09M	57.61M	302.83M	-16.54M	176.90M	13.06M
	EBIT
-144.00M	303.67M	292.42M	79.79M	240.84M	37.45M
	EBITDA
33.48M	332.23M	-61.63M	279.70M	235.81M	0.00
	Net Income Common Stockholders
9.02M	57.91M	117.33M	29.22M	237.26M	39.22M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
97.84M	63.97M	145.54M	23.53M	29.33M	39.10M
	Total Assets
3.08B	3.20B	3.22B	2.65B	2.64B	1.64B
	Total Debt
0.00	0.00	1.60B	1.30B	1.27B	709.32M
	Net Debt
-97.84M	-63.97M	1.46B	1.28B	1.24B	670.22M
	Total Liabilities
1.60B	1.71B	1.70B	1.40B	1.32B	725.83M
	Stockholders Equity
1.48B	1.49B	1.52B	1.25B	1.31B	914.88M
Cash Flow		Free Cash Flow
288.13M	19.08M	228.76M	22.39M	-230.52M	-152.88M
	Operating Cash Flow
288.13M	19.08M	228.76M	22.39M	-230.52M	-152.88M
	Investing Cash Flow
0.00	0.00	0.00	-8.32M	-328.01M	-147.61M
	Financing Cash Flow
-190.51M	-86.77M	-110.41M	-26.82M	224.19M	176.33M

Oaktree Specialty Lending Technical Analysis

Technical Analysis Sentiment

Negative

Last Price13.71

Price Trends

50DMA

13.75

Negative

100DMA

14.30

Negative

200DMA

14.46

Negative

Market Momentum

MACD

-0.01

Positive

RSI

45.79

Neutral

STOCH

23.01

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For OCSL, the sentiment is Negative. The current price of 13.71 is below the 20-day moving average (MA) of 13.91, below the 50-day MA of 13.75, and below the 200-day MA of 14.46, indicating a bearish trend. The MACD of -0.01 indicates Positive momentum. The RSI at 45.79 is Neutral, neither overbought nor oversold. The STOCH value of 23.01 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for OCSL.

Oaktree Specialty Lending Risk Analysis

Oaktree Specialty Lending disclosed 70 risk factors in its most recent earnings report. Oaktree Specialty Lending reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 1 New Risks

Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine. Q2, 2022

Oaktree Specialty Lending Peers Comparison

Overall Rating

UnderperformOutperform

Sector (65)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
YRD	73 Outperform	$526.22M	2.86	14.69%	3.74%	12.45%	-36.64%
LX	73 Outperform	$1.19B	6.67	12.60%	3.18%	7.53%	37.86%
BBDC	70 Outperform	$954.70M	9.69	8.24%	13.69%	3.82%	-12.74%
AGM	66 Neutral	$2.01B	11.66	13.51%	3.19%	26.19%	3.95%
Sector *	65 Neutral	$12.76B	9.91	7.89%	78.91%	12.06%	-7.95%
OCSL	59 Neutral	$1.21B	107.23	0.60%	12.25%	-37.81%	-90.29%
LC	57 Neutral	$1.28B	24.76	3.86%	―	5.72%	31.82%

* Financial Sector Average

Performance Comparison

OCSL

Oaktree Specialty Lending

13.71

-2.87

-17.31%

AGM

Federal Agricultural

188.14

15.24

8.81%

BBDC

Barings BDC

9.06

0.52

6.09%

LendingClub

11.01

2.71

32.65%

YRD

Yiren Digital

5.89

1.27

27.49%

Lexinfintech Holdings

6.91

5.29

326.54%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.