Prospect Capital (PSEC) AI Stock Analysis

• Market Cap: $1.60B
• Dividend Yield: 19.66%
• Average Volume (3M): 3.81M
• Price to Earnings (P/E): ―
• Beta (1Y): 0.64
• Revenue Growth: -54.81%
• EPS Growth: -472.20%
• Country: US
• Employees: N/A
• Sector: Financial
• Sector Strength: 72
• Industry: Asset Management
• EPS (TTM): 0.17
• Shares Outstanding: 462,343,440
• 10 Day Avg. Volume: 3,463,207
• 30 Day Avg. Volume: 3,810,096
• 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: 2.33
• Enterprise Value/Revenue: 6.25
• Enterprise Value/Gross Profit: 4.22
• Enterprise Value/Ebitda: -17.99
• 1Y Price Target: $2.50
• Price Target Upside: -13.79% Downside
• Rating Consensus: Moderate Sell
• Number of Analyst Covering: 1

• Rating: 58 Neutral
• Price Target: ―

Prospect Capital's overall score is driven by mixed financial performance with strong current profitability but historical volatility. Technical analysis points to bearish momentum, which is a significant concern. The high dividend yield is a positive, but the negative P/E ratio indicates potential sustainability issues. Overall, the stock presents a balanced risk-reward profile, with strengths in cash flow management and dividend yield, but significant technical and valuation challenges.

Positive Factors

Acquisition

The acquisition of QC Holdings is expected to complement PSEC's existing consumer lending franchises.

Repayments and Leverage

PSEC saw strong repayments this quarter and was able to bring the revolver down a touch ahead of its March '25 convert.

Negative Factors

Capital Returns

The ongoing wind down of CLOs with significant realized losses poses a challenge to capital returns.

Dividend Challenges

The anticipated dividend reset to a lower amount reflects challenges in maintaining current dividend levels.

Earnings Risk

A levered path forward with nearly full revolver headroom could result in a negative earnings trajectory even without the incentive fee.

Prospect Capital Business Overview & Revenue Model

Company Description

Prospect Capital Corporation is a business development company. It specializes in middle market, mature, mezzanine finance, later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development, capital expenditures and subordinated debt tranches of collateralized loan obligations, cash flow term loans, market place lending and bridge transactions. It also makes real estate investments particularly in multi-family residential real estate asset class. The fund makes secured debt, senior debt, senior and secured term loans, unitranche debt, first-lien and second lien, private debt, private equity, mezzanine debt, and equity investments in private and microcap public businesses. It focuses on both primary origination and secondary loans/portfolios and invests in situations like debt financings for private equity sponsors, acquisitions, dividend recapitalizations, growth financings, bridge loans, cash flow term loans, real estate financings/investments. It also focuses on investing in small-sized and medium-sized private companies rather than large public companies. The fund typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors. It invests in aerospace and defense, chemicals, conglomerate services, consumer services, ecological, electronics, financial services, machinery, manufacturing, media, pharmaceuticals, retail, software, specialty minerals, textiles and leather, transportation, oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sectors. It prefers to invest in the United States and Canada. The fund seeks to invest between $10 million to $500 million per transaction in companies with EBITDA between $5 million and $150 million, sales value between $25 million and $500 million, and enterprise value between $5 million and $1000 million. It fund also co-invests for larger deals. The fund seeks control acquisitions by providing multiple levels of the capital structure. The fund focuses on sole, agented, club, or syndicated deals.

How the Company Makes Money

Prospect Capital makes money through interest income, dividends, and capital gains generated from its diverse portfolio of debt and equity investments in middle-market companies. The company earns interest income from its investments in secured and unsecured loans, while its equity investments provide dividend income. Additionally, Prospect Capital may realize capital gains through the appreciation and eventual sale of its equity stakes. The firm also engages in partnerships and leverages its expertise in structuring and managing investments to enhance returns for its shareholders. The company's revenue model is driven by its ability to effectively manage and grow its investment portfolio, ensuring a steady flow of income from its financial products.

Prospect Capital Financial Statement Overview

Summary

Prospect Capital presents a mixed financial performance. The income statement shows strong profitability in the TTM, but historical volatility in revenue and margins raises concerns. The balance sheet is robust with moderate leverage and a strong equity position, though ROE remains low. Cash flows have improved significantly, indicating better liquidity management. Overall, while current financials show strength, historical inconsistencies suggest areas needing attention for sustained performance.

Income Statement

Prospect Capital has shown a mixed performance in its income statement. The TTM data indicates a gross profit margin of approximately 77.17% and a net profit margin of 7.91%, reflecting strong profitability. However, the revenue growth has been inconsistent, with fluctuations across the years. EBIT margin stands at 69.03% for the TTM, which is robust, but the EBITDA margin is only 13.75%, suggesting high non-cash expenses or depreciation impacting the margins. Overall, while the company shows strong profitability in the latest period, historical volatility in revenue and margins presents a concern.

Balance Sheet

The balance sheet of Prospect Capital indicates a stable financial position with a debt-to-equity ratio of 0.31 in the TTM, suggesting moderate leverage, which is a positive sign for financial stability. The equity ratio stands at 70.09%, indicating a strong equity base relative to total assets. Return on equity is 0.79% in the TTM, which is low, pointing to inefficiencies in generating returns for shareholders. While the capital structure appears solid, the low ROE suggests potential inefficiencies in utilizing equity.

Cash Flow

The cash flow statement shows a strong recovery in operating cash flow in the TTM at $586.87 million compared to previous periods. The free cash flow also mirrors this positive trend, indicating improved liquidity and cash-generating capabilities. The operating cash flow to net income ratio is high, reflecting strong cash conversion from earnings. Free cash flow growth has rebounded, suggesting effective cash management, although past periods show significant fluctuations.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	595.21M	770.31M	811.17M	697.72M	1.02B	18.98M
Gross Profit	880.77M	861.66M	568.65M	477.86M	631.97M	-157.99M
EBITDA	-206.69M	0.00	-101.64M	897.27M	1.12B	-16.22M
Net Income	-244.44M	262.83M	-101.64M	582.58M	963.81M	-16.22M
Balance Sheet
Total Assets	7.00B	7.86B	7.86B	7.66B	6.30B	5.30B
Cash, Cash Equivalents and Short-Term Investments	52.20M	85.87M	90.57M	31.17M	63.61M	44.56M
Total Debt	2.03B	2.43B	2.58B	2.74B	2.23B	2.14B
Total Liabilities	3.75B	2.56B	2.71B	3.54B	2.36B	2.24B
Stockholders Equity	3.25B	5.30B	5.15B	4.12B	3.95B	3.06B
Cash Flow
Free Cash Flow	1.04B	279.98M	-220.85M	-795.34M	31.02M	429.44M
Operating Cash Flow	1.04B	279.98M	-220.85M	-795.34M	31.02M	429.44M
Investing Cash Flow	92.29M	-2.12M	-505.51M	-1.11B	-154.81M	264.46M
Financing Cash Flow	-657.54M	-289.76M	281.13M	767.09M	-11.97M	-491.98M

Prospect Capital Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 2.90
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PSEC, the sentiment is Neutral. The current price of 2.9 is above the 20-day moving average (MA) of 2.82, below the 50-day MA of 3.04, and below the 200-day MA of 3.56, indicating a neutral trend. The MACD of -0.07 indicates Negative momentum. The RSI at 48.72 is Neutral, neither overbought nor oversold. The STOCH value of 23.33 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for PSEC.

Prospect Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TSLX	76 Outperform	$2.28B	12.01	11.66%	8.58%	-6.29%	-15.46%
CSWC	74 Outperform	$1.26B	14.07	9.74%	10.14%	12.82%	-5.37%
GSBD	71 Outperform	$1.30B	9.11	9.36%	15.34%	-55.16%	47.09%
Sector *	68 Neutral	$17.84B	12.03	10.32%	3.73%	9.70%	0.76%
BCSF	66 Neutral	$1.01B	9.26	9.42%	11.56%	-3.29%	-16.86%
NMFC	65 Neutral	$1.11B	13.66	6.18%	12.52%	39.05%	-32.62%
PSEC	58 Neutral	$1.60B	―	-9.48%	19.66%	-54.81%	-472.20%

Prospect Capital Corporate Events

Prospect Capital Reports Q4 Financial Results 2024

On February 10, 2025, Prospect Capital announced its financial results for the fiscal quarter ended December 31, 2024, reporting a net investment income of $86.4 million. The company declared monthly dividends for various classes of preferred stock and common shareholders for February to April 2025, emphasizing its focus on middle market lending and portfolio optimization strategies, including investments in Taos Footwear and other companies.