OFS Capital (OFS) AI Stock Analysis

• Market Cap: $111.74M
• Dividend Yield: 16.33%
• Average Volume (3M): 35.40K
• Price to Earnings (P/E): 10.9
• Beta (1Y): 0.30
• Revenue Growth: -53.07%
• EPS Growth: N/A
• Country: US
• Employees: 53
• Sector: Financial
• Sector Strength: 71
• Industry: Asset Management
• EPS (TTM): 0.25
• Shares Outstanding: 13,398,078
• 10 Day Avg. Volume: 30,326
• 30 Day Avg. Volume: 35,397
• PEG Ratio: >-0.01
• Price to Book (P/B): 0.63
• Price to Sales (P/S): 2.18
• P/FCF Ratio: 3.28
• Enterprise Value/Market Cap: 3.09
• Enterprise Value/Revenue: 10.07
• Enterprise Value/Gross Profit: 16.37
• Enterprise Value/Ebitda: 19.21
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0

• Rating: 70 Outperform
• Price Target: ―

OFS Capital's overall stock score reflects a strong financial foundation with high profitability and attractive valuation metrics. However, concerns about declining revenue, cash flow issues, and economic uncertainties weigh on the score. The stock's upward technical momentum and high dividend yield provide potential for returns, balancing the challenges highlighted in the earnings call.

OFS Capital Business Overview & Revenue Model

Company Description

OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It provides flexible capital solutions primarily through debt capital and to a lesser extent, minority equity investments serving the needs of U.S.-based middle-market companies across a broad array of industries. It does not invest in operational turnarounds or start-up businesses. For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies. It invests in the aerospace and defense, business services, consumer products and services, food and beverage, health care services, specialty chemicals, transportation and logistics, value added distribution, franchising, and industrial and niche manufacturing sectors. The firm invests in companies based in United States. It seeks to invest between $5 million and $35 million, revenues between $10 million and $200 million, annual EBITDA more than $5 million, and Enterprise value between $10 million and $500 million. The firm seeks to invest in companies with debt investment values between $5 million and $25 million. The fund uses senior secured, unitranche loans, first-lien, second-lien, subordinated/ mezzanine loans, warrants, and preferred equity securities and common equity securities. It prefers to take a minority as well as majority stake in the investments made. It also co-invests with its partners for additional capital.

How the Company Makes Money

OFS Capital makes money primarily through the interest income it earns on its debt investments, which include senior secured loans and subordinated loans extended to middle-market companies. The company also generates revenue from dividends and capital gains on its equity investments. Additionally, OFS benefits from fee income related to its investment activities, such as origination fees, amendment fees, and prepayment fees. These revenue streams are complemented by its strategic partnerships and relationships within the financial industry, which facilitate deal sourcing and investment opportunities.

OFS Capital Financial Statement Overview

Summary

OFS Capital demonstrates strong profitability and efficient management with high margins and good equity returns. However, declining revenue and free cash flow raise concerns about future growth prospects. The balance sheet reflects prudent financial management with moderate leverage, although asset decline is a potential risk. Overall, the company is financially stable but must address revenue and cash flow challenges to sustain long-term growth.

Income Statement

The TTM (Trailing-Twelve-Months) data shows a strong gross profit margin of 87.16% and a solid net profit margin of 87.54%, indicating efficient cost management and profitability. However, the revenue growth rate is negative, suggesting declining sales compared to previous years. The EBIT margin is robust at 101.10%, reflecting effective operational control. Overall, while profitability metrics are strong, declining revenue is a concern.

Balance Sheet

The company's debt-to-equity ratio is 0.42, which is relatively low and indicates moderate leverage. Return on Equity (ROE) is high at 23.37%, showing effective use of shareholders' equity to generate profit. The equity ratio of 38.93% suggests a healthy proportion of equity financing. The balance sheet is stable with good profitability and manageable debt levels, though a decrease in total assets over time could be a risk.

Cash Flow

The free cash flow growth rate is negative, indicating a decline in free cash flow from previous periods. Operating cash flow to net income ratio is 0.63, which suggests that operating cash flow is lower than net income, potentially indicating issues with cash conversion. Free cash flow to net income ratio is 0.63 as well, highlighting the need for improved cash flow management. Cash flow is stable but shows signs of potential strain.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	34.27M	49.52M	45.59M	46.26M	68.23M	10.33M
Gross Profit	21.08M	32.88M	31.24M	35.77M	54.31M	-918.00K
EBITDA	17.96M	28.51M	40.05M	35.79M	80.11M	0.00
Net Income	10.24M	28.44M	-465.00K	-7.74M	56.86M	3.69M
Balance Sheet
Total Assets	395.44M	428.12M	469.82M	520.72M	569.05M	483.81M
Cash, Cash Equivalents and Short-Term Investments	10.24M	6.07M	45.35M	515.51K	43.05M	37.71M
Total Debt	242.20M	68.35M	299.73M	331.75M	344.81M	309.19M
Total Liabilities	249.25M	255.90M	307.81M	340.29M	365.30M	324.86M
Stockholders Equity	146.20M	172.22M	162.00M	180.42M	203.74M	158.96M
Cash Flow
Free Cash Flow	33.14M	33.01M	81.57M	2.95M	-12.01M	80.63M
Operating Cash Flow	33.14M	33.01M	81.57M	2.95M	-12.01M	80.63M
Investing Cash Flow	2.77M	0.00	0.00	-107.55M	-216.11M	-59.63M
Financing Cash Flow	-23.92M	-72.29M	-51.15M	-31.06M	17.35M	-56.36M

OFS Capital Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 8.34
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For OFS, the sentiment is Positive. The current price of 8.34 is above the 20-day moving average (MA) of 8.32, below the 50-day MA of 8.44, and above the 200-day MA of 8.04, indicating a neutral trend. The MACD of -0.03 indicates Negative momentum. The RSI at 49.57 is Neutral, neither overbought nor oversold. The STOCH value of 61.90 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for OFS.

OFS Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
OFS	70 Outperform	$111.74M	10.89	6.82%	16.33%	-53.07%	―
MRCC	69 Neutral	$158.16M	82.33	1.01%	13.70%	-17.51%	-75.48%
Sector *	68 Neutral	$17.69B	11.82	10.30%	3.73%	9.66%	0.42%
BCIC	55 Neutral	$158.57M	―	-4.79%	4.08%	-62.82%	-170.97%
OXSQ	51 Neutral	$171.68M	602.56	-0.87%	19.00%	-569.90%	-144.29%
GECC	48 Neutral	$129.57M	7.14	13.18%	12.86%	52.57%	13.36%
SSSS	45 Neutral	$207.83M	4.53	29.40%	2.84%	168.31%	―

OFS Capital Corporate Events

OFS Capital Announces CFO Transition in 2025

On January 28, 2025, Jeffrey A. Cerny announced his resignation as Chief Financial Officer and Treasurer of OFS Capital Corporation, effective March 31, 2025, without any disagreements related to company operations. Kyle Spina, with over 15 years of experience in accounting, will replace him as CFO and Treasurer, bringing extensive expertise from his previous roles, enhancing the company’s financial leadership.