Saratoga Investment (SAR) AI Stock Analysis

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Saratoga Investment

(NYSE:SAR)

Rating:68Neutral

Price Target:―

Saratoga Investment's overall score reflects strong technical indicators and attractive valuation, balanced by mixed financial performance and earnings call sentiment. Revenue growth and operational efficiency are strengths, but low net margins and high leverage pose risks. The stock's upward price momentum and high dividend yield provide additional support for the score.

Positive Factors

Dividend

The dividend yield is projected at 12.9%, with expectations for stock price appreciation, providing a potential attractive total return.

Dividend Sustainability

Dividend sustainability is supported by substantial over-earning, even with potential future Fed rate cuts.

Earnings

The investment portfolio is expected to grow, which should support earnings per share and net investment income to cover the new dividend.

Negative Factors

Core Net Investment Income

Core net investment income fell below the new dividend level due to previous rate cuts and a smaller average investment portfolio.

Net Asset Value

The net asset value was down by 4% due to a net loss and dividends, resulting in a lower price target.

Saratoga Investment (SAR) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$359.54M

Dividend Yield12.42%

Average Volume (3M)131.12K

Price to Earnings (P/E)12.0

Beta (1Y)0.39

Revenue Growth-24.05%

EPS Growth28.25%

CountryUS

EmployeesN/A

SectorFinancial

Sector Strength74

IndustryAsset Management

Share Statistics

EPS (TTM)0.56

Shares Outstanding15,364,864

10 Day Avg. Volume182,924

30 Day Avg. Volume131,116

Financial Highlights & Ratios

PEG Ratio-0.28

Price to Book (P/B)0.95

Price to Sales (P/S)0.00

P/FCF Ratio-2.53

Enterprise Value/Market Cap2.63

Enterprise Value/Revenue2.65

Enterprise Value/Gross Profit22.44

Enterprise Value/Ebitda8.38

Forecast

1Y Price Target

$24.92

Price Target Upside2.55% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering3

Saratoga Investment Business Overview & Revenue Model

Company DescriptionSaratoga Investment Corp (SAR) is a business development company that provides customized financing solutions to middle-market companies in the United States. It operates primarily in the sectors of technology, business services, and healthcare. The company focuses on delivering debt and equity capital to support growth, acquisitions, and refinancing needs, facilitating the expansion and operational success of its portfolio companies.

How the Company Makes MoneySaratoga Investment Corp generates revenue primarily through interest income from the debt investments it makes in middle-market businesses. These investments typically include first and second lien loans, mezzanine debt, and, to a lesser extent, equity investments. The company also earns money from capital gains when it exits equity positions in successful portfolio companies. Additionally, Saratoga Investment benefits from management and incentive fees, which are tied to the performance of the assets under management, given its role as an investment adviser. This structure allows the company to capitalize on both steady interest income and potential upside from equity investments.

Saratoga Investment Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q4-2025)

% Change Since: -0.53%|

Next Earnings Date:Jul 15, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with positive aspects like increased AUM, strong liquidity, and positive realized gains, but also highlighted challenges such as decreased net investment income, NAV decline, unrealized depreciation, and ongoing issues with certain portfolio companies.

Q4-2025 Updates

Positive Updates

Increased AUM and Strong Dividend History

Saratoga Investment Corp reported an increase in AUM on a fair value basis following significant repayments. They also transitioned to a monthly dividend structure, increasing the quarterly base dividend by $0.01 per share to $0.25 per share per month, implying a 12.1% dividend yield based on the stock price.

Robust Liquidity Position

At quarter end, Saratoga maintained a substantial $428 million of investment capacity to support portfolio companies, with $136 million available through the SBIC III license, $87.5 million from revolving credit facilities, and $205 million in cash.

Strong Credit Quality

Overall credit quality remains steady with 99.7% of credits rated in the highest category. Only two investments are on non-accrual status, representing a minimal percentage of fair value and cost.

Positive Realized Gains

Three equity realizations generated $7.2 million of realized gains in Q4, continuing a trend of positive returns from equity investments.

Negative Updates

Decreased Net Investment Income

Adjusted Net Investment Income (NII) decreased by 37.2% from last year and 35.4% from last quarter, primarily due to lower total investment income and an annual excise tax expense.

NAV and NII Per Share Decline

NAV per share decreased from $27.12 last year to $25.86, while adjusted NII per share decreased to $0.56, down from $0.94 last year.

Unrealized Depreciation

The portfolio experienced an overall reduction of $7.6 million in value due to unrealized depreciation, including the CLO and JV markdowns.

Challenges in Portfolio Companies

Significant challenges were encountered in four portfolio companies over the past year, with actions taken to resolve issues through sales and restructurings. The investments in Pepper Palace and Zollege remain on non-accrual status.

Company Guidance

During Saratoga Investment Corporation's fiscal year-end and fourth-quarter 2025 conference call, key guidance included several financial metrics and strategic moves. The company reported a transition to a monthly dividend structure, enhancing its quarterly base dividend to $0.25 per share per month, translating to an annualized first-quarter dividend yield of 12.1% based on a stock price of $24.86 as of May 6, 2025. The fourth quarter adjusted net investment income (NII) was $0.56 per share, with an adjusted NII of $0.69 per share after accounting for a $0.13 excise tax expense. The net asset value (NAV) at the quarter's end was reported at $392.7 million, up 6.1% from the previous year, and $329.7 million net asset value (NAV) at the quarter's end, up 6.1% year-over-year and 4.7% sequentially. The portfolio's fair value was 2.2% below cost, with a core non-CLO portfolio marked 1.6% above cost. The call also emphasized a $205 million cash reserve for potential future investments or debt repayment, and highlighted an increase of $45.5 million in originations post-quarter end, amidst a volatile macroeconomic environment.

Saratoga Investment Financial Statement Overview

Summary

Saratoga Investment shows strong revenue growth and operational efficiency, as evidenced by high gross and EBIT margins. However, low net profit margins imply potential challenges with non-operational costs. The balance sheet suggests moderate leverage with a stable equity base. Cash flows have improved significantly, but historical volatility indicates potential liquidity risks. Overall, the company is on a positive trajectory with opportunities for improved profitability.

Income Statement

Positive

The income statement shows a strong gross profit margin at 99.84% for the TTM, indicating efficient cost management relative to revenue. However, the net profit margin is relatively low at 0.07%, highlighting potential issues with higher non-operating expenses or taxes. Revenue growth is robust, with substantial increases over the periods, particularly between the latest TTM and previous periods. EBIT and EBITDA margins are positive, showing operational efficiency, but the low net income impacts profitability.

Balance Sheet

Positive

The balance sheet indicates a healthy equity position, with a debt-to-equity ratio of 2.06, which is manageable but slightly on the higher side for asset management firms, suggesting moderate leverage. The return on equity is modest at 6.73%, reflecting average profitability on shareholder investments. The equity ratio of 30.73% is stable, indicating a solid equity foundation relative to total assets.

Cash Flow

Neutral

Cash flow analysis reveals a significant improvement in free cash flow, with a remarkable growth rate in the TTM. The operating cash flow to net income ratio is robust at 3733.47, highlighting strong cash generation relative to net income. However, historical negative operating cash flows and high capital expenditures could pose liquidity risks if not managed.

Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Breakdown
Income Statement		Total Revenue
94.16M	69.55M	69.85M	77.46M	39.91M
	Gross Profit
42.10M	20.36M	36.35M	57.58M	26.32M
	EBIT
31.97M	11.70M	26.76M	48.52M	19.94M
	EBITDA
31.97M	11.70M	26.76M	48.52M	19.94M
	Net Income Common Stockholders
28.09M	8.93M	24.68M	45.74M	14.78M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
148.22B	8.69M	65.75B	52.87M	18.83M
	Total Assets
1.19T	1.19B	1.08B	876.24M	592.15M
	Total Debt
730.58B	803.67M	711.13M	498.88M	274.05M
	Net Debt
582.36B	794.98M	615.05M	446.01M	255.22M
	Total Liabilities
798.88B	820.98M	731.20M	520.46M	287.97M
	Stockholders Equity
392.67B	370.22M	346.96M	355.78M	304.19M
Cash Flow		Free Cash Flow
96.46B	-157.21M	-130.37M	-203.13M	-62.35M
	Operating Cash Flow
96.46B	-157.21M	-130.37M	-203.13M	-62.35M
	Investing Cash Flow
110.64B	0.00	2.25B	-55.08B	-78.08B
	Financing Cash Flow
-87.29B	101.64M	173.58M	226.09M	52.81M

Saratoga Investment Technical Analysis

Technical Analysis Sentiment

Positive

Last Price24.30

Price Trends

50DMA

23.73

Positive

100DMA

23.73

Positive

200DMA

22.86

Positive

Market Momentum

MACD

0.07

Positive

RSI

52.87

Neutral

STOCH

33.66

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SAR, the sentiment is Positive. The current price of 24.3 is below the 20-day moving average (MA) of 24.35, above the 50-day MA of 23.73, and above the 200-day MA of 22.86, indicating a neutral trend. The MACD of 0.07 indicates Positive momentum. The RSI at 52.87 is Neutral, neither overbought nor oversold. The STOCH value of 33.66 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SAR.

Saratoga Investment Risk Analysis

Saratoga Investment disclosed 83 risk factors in its most recent earnings report. Saratoga Investment 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 0 New Risks

Saratoga Investment Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ARCC	74 Outperform	$14.80B	10.43	10.29%	9.01%	14.14%	-31.30%
MAIN	74 Outperform	$5.11B	9.75	19.31%	5.22%	51.80%	12.05%
GSBD	71 Outperform	$1.33B	26.33	3.27%	16.87%	-28.04%	-69.52%
SAR	68 Neutral	$359.54M	11.96	7.36%	12.42%	-24.05%	28.25%
Sector *	64 Neutral	$12.86B	9.79	7.84%	78.10%	12.05%	-7.99%
PSEC	58 Neutral	$1.60B	―	-4.80%	16.67%	-31.63%	-0.75%
TCPC	58 Neutral	$619.08M	―	-5.45%	15.93%	8.24%	-207.60%

* Financial Sector Average

Performance Comparison

SAR

Saratoga Investment

24.30

4.26

21.26%

MAIN

Main Street Capital

57.91

11.90

25.86%

PSEC

Prospect Capital

3.18

-1.74

-35.37%

ARCC

Ares Capital

21.32

2.50

13.28%

TCPC

BlackRock TCP Capital

7.43

-1.71

-18.71%

GSBD

Goldman Sachs BDC

11.41

-2.07

-15.36%

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.