Stellus Capital (SCM) AI Stock Analysis

• Market Cap: $264.58M
• Dividend Yield: 12.83%
• Average Volume (3M): 318.21K
• Price to Earnings (P/E): 17.2
• Beta (1Y): 0.57
• Revenue Growth: 90.34%
• EPS Growth: -44.25%
• Country: US
• Employees: N/A
• Sector: Financial
• Sector Strength: 70
• Industry: Asset Management
• EPS (TTM): 0.29
• Shares Outstanding: 28,947,254
• 10 Day Avg. Volume: 350,092
• 30 Day Avg. Volume: 318,208
• PEG Ratio: -0.28
• Price to Book (P/B): <0.01
• Price to Sales (P/S): 3.47
• P/FCF Ratio: -0.01
• Enterprise Value/Market Cap: 1.49K
• Enterprise Value/Revenue: 4.81K
• Enterprise Value/Gross Profit: 4.99K
• Enterprise Value/Ebitda: 6.20K
• 1Y Price Target: $9.00
• Price Target Upside: -28.57% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 1
• EPS Forecast (FY): 1.04
• Revenue Forecast (FY): $99.87M

• Rating: 55 Neutral
• Price Target: $9.00 ▼(-28.57% Downside)
• Action: Reiterated Date: 03/13/26
• Date: Action: Reiterated 03/13/26

The score is primarily held back by weak financial quality—especially consistently negative operating/free cash flow and meaningful leverage—alongside bearish technical momentum. Offsetting factors include an exceptionally high dividend yield and a generally stable portfolio with supportive capital actions (buyback and debt repayment plans), though NAV and dividend coverage pressures temper the outlook.

Positive Factors

Secured, floating-rate loan book

A predominantly secured, floating-rate portfolio offers durable downside protection and ongoing rate sensitivity. Collateralization reduces loss severity in stress, while floating coupons help net interest income reprice with rising base rates, supporting mid-term cash yields and interest income resilience.

High proportion of performing credits

A large share of credits performing to plan indicates stable underwriting and portfolio quality, limiting near-term loss realization. Sustained portfolio health reduces capital volatility, supports recurring interest income, and gives management flexibility to selectively originate or workout loans over the next several quarters.

Advisor strategic transaction to expand origination

The advisor's pending combination with a larger platform should materially enlarge sponsor relationships and distribution channels, increasing proprietary deal flow. Over 2–6 months this structural change can sustainably boost new originations and diversification of lending opportunities for the BDC.

Negative Factors

Consistent negative operating/free cash flow

Persistent negative operating and free cash flow means reported earnings are not converting to cash, constraining internal capital for dividends, buybacks or debt reduction. Over several quarters this limits financial flexibility and raises reliance on external funding or asset sales to meet distributions and obligations.

Elevated and persistent leverage

Sustained high leverage increases sensitivity to credit losses and interest-rate swings, compressing net returns during downturns. Elevated borrowing limits ability to absorb nonaccruals without NAV pressure and constrains growth options, making capital management critical over the medium term.

Distributions exceed recent NII; NAV pressure

Paying distributions above recent net investment income erodes NAV and forces reliance on realized gains, fee income or balance-sheet actions. Continued payout over-coverage can deplete capital buffers, heighten market discount risk, and pressure sustainability of dividends across the next several quarters.

Stellus Capital Business Overview & Revenue Model

Company Description

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.

How the Company Makes Money

Stellus Capital makes money primarily through investment income generated from its portfolio of loans and related investments. Its key revenue stream is interest income earned on debt investments (e.g., first-lien and second-lien loans, subordinated debt), which may include contractual coupon interest and, where applicable, payment-in-kind (PIK) interest. In addition to recurring interest, Stellus can earn fee income associated with originating or holding loans, such as upfront origination/structuring fees, amendment or consent fees, and other transaction-related charges that are typically recognized over the life of the loan or when earned, depending on the fee type and accounting treatment. The company may also realize capital gains (or losses) from equity investments, warrants, or other equity-linked positions received alongside debt financings, as well as from repayments, refinancings, restructurings, or sales of portfolio positions. As a BDC, Stellus’s ability to generate earnings is influenced by the level of assets invested (portfolio size), prevailing base rates (many middle-market loans are floating-rate), borrower credit performance (including non-accruals), and the pace of new originations versus repayments. null

Stellus Capital Financial Statement Overview

Summary

Reported profitability is strong with high net margins in core years, but the investment case is heavily weakened by persistently negative operating/free cash flow across 2020–2025 and an elevated leverage profile (debt above equity). The 2025 filing showing extreme revenue with zeroed profit fields also reduces confidence in trend reliability.

Income Statement

Profitability is strong in the core operating years (2020–2024), with very high net margins (roughly ~32%–55%) and solid operating profitability as revenue grew in 2023 and 2024. However, results are volatile: 2022 saw a revenue decline, and the 2025 annual file shows extreme revenue growth alongside zeroed profit fields, which raises data-quality/one-time or reporting-consistency concerns and reduces confidence in trend durability.

Balance Sheet

Leverage is elevated and persistent, with debt running above equity across the period (debt-to-equity generally ~1.4x–2.2x; 2025 at ~1.13x). Equity has grown, which is a positive, but overall balance-sheet risk remains meaningful given the consistently high borrowing levels and only moderate returns on equity in most years (low-to-mid teens at best).

Cash Flow

Cash generation is the key weakness: operating cash flow and free cash flow are negative every year shown (2020–2025), including large outflows in multiple periods. Coverage is consistently negative, indicating reported earnings are not translating into cash, and while the size of outflows improved in some years, the business has not demonstrated sustained positive cash generation.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	103.67M	82.72M	53.24M	45.42M	61.38M
Gross Profit	78.87M	51.21M	21.23M	20.95M	42.66M
EBITDA	63.57M	47.46M	16.01M	15.87M	37.12M
Net Income	27.05M	45.84M	17.53M	14.49M	33.57M
Balance Sheet
Total Assets	1.04T	980.90M	908.09M	898.18M	821.26M
Cash, Cash Equivalents and Short-Term Investments	25.05B	20.06M	26.13M	48.04M	44.17M
Total Debt	418.66B	593.01M	575.83M	604.13M	518.17M
Total Liabilities	670.07B	610.98M	588.15M	622.41M	536.15M
Stockholders Equity	371.18B	369.92M	319.94M	275.78M	285.11M
Cash Flow
Free Cash Flow	-24.45B	-28.65M	-17.27M	-56.29M	-76.10M
Operating Cash Flow	-24.45B	-28.65M	-17.27M	-56.29M	-76.10M
Investing Cash Flow	-54.42B	0.00	0.00	0.00	0.00
Financing Cash Flow	29.44M	22.58M	-4.65M	60.16M	101.80M

Stellus Capital Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 12.60
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SCM, the sentiment is Negative. The current price of 12.6 is above the 20-day moving average (MA) of 9.86, above the 50-day MA of 11.36, and above the 200-day MA of 12.27, indicating a bearish trend. The MACD of -0.69 indicates Positive momentum. The RSI at 31.01 is Neutral, neither overbought nor oversold. The STOCH value of 22.45 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SCM.

Stellus Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
SSSS	62 Neutral	$257.94M	4.69	35.45%	5.39%	―	―
GLAD	59 Neutral	$407.35M	19.71	7.50%	9.31%	41.12%	-40.68%
PNNT	59 Neutral	$312.12M	10.64	5.42%	16.61%	-3.09%	200.66%
SCM	55 Neutral	$264.58M	17.24	0.03%	12.83%	90.34%	-44.25%
CION	53 Neutral	$339.34M	-3.08	-3.58%	15.77%	-11.01%	-65.56%
TPVG	52 Neutral	$214.20M	5.35	14.02%	17.28%	206.13%	298.86%

Stellus Capital Corporate Events

Stellus Capital to Be Acquired by P10, Inc.

On February 5, 2026, Stellus Capital Management and Stellus Capital Investment Corporation disclosed that Stellus has entered into a definitive agreement to be acquired by P10, Inc., a private markets solutions provider with more than $40 billion in assets under management, in a transaction expected to close in mid-2026. While the deal will trigger a change of control and a required termination and reapproval of Stellus’s investment advisory agreement with Stellus Capital Investment Corporation, Stellus’s current partners will retain control of day-to-day operations and investment processes, with both parties positioning the transaction as a way to pair Stellus’s direct lending franchise with P10’s broader middle- and lower-middle-market platform, sponsor network, and resources, potentially expanding deal flow and product offerings without altering Stellus’s core investment strategy for clients and other stakeholders.

The most recent analyst rating on (SCM) stock is a Hold with a $14.50 price target. To see the full list of analyst forecasts on Stellus Capital stock, see the SCM Stock Forecast page.