Stellus Capital Investment (SCM)
:SCM

Stellus Capital (SCM) AI Stock Analysis

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Stellus Capital

(NYSE:SCM)

67Neutral
Stellus Capital's overall score reflects solid valuation metrics and robust investment activity, tempered by profitability challenges and cash flow issues. The company's conservative leverage and record portfolio size are positives but are offset by concerns about dividend coverage and nonaccrual loans.

Stellus Capital (SCM) vs. S&P 500 (SPY)

Stellus Capital Business Overview & Revenue Model

Company DescriptionStellus Capital Management, LLC (SCM) is an investment firm specializing in providing capital solutions to middle-market companies. Operating primarily in sectors such as business services, industrial, healthcare, and energy, Stellus Capital offers a range of financial products including debt financing and equity investments. The company is focused on delivering tailored financial solutions to support growth, acquisitions, and recapitalizations.
How the Company Makes MoneyStellus Capital makes money through interest income and capital gains generated from its investment portfolio. The company primarily invests in debt and equity securities of middle-market companies, earning interest from loans and potentially benefiting from the appreciation of equity investments. Stellus Capital may also generate fees from managing investment funds and forming strategic partnerships that expand its investment network and enhance deal flow. By leveraging its expertise in credit analysis and risk management, Stellus Capital aims to achieve attractive risk-adjusted returns for its shareholders.

Stellus Capital Financial Statement Overview

Summary
Stellus Capital exhibits growth potential with revenue increases but faces challenges with profitability and cash flow. The company's high leverage and inconsistent income generation may hinder stability. Improvements in cost management and cash flow optimization are crucial.
Income Statement
65
Positive
The income statement shows a volatile revenue trend with a significant increase in the latest year, but consistent profitability issues as indicated by zero net income for the latest period. Gross profit margins were healthy in previous years, with EBIT margins showing strength but no EBITDA data available. Revenue growth has been inconsistent year-over-year.
Balance Sheet
70
Positive
The balance sheet reveals a high level of debt with a debt-to-equity ratio of approximately 1.14 for 2023. Stockholders' equity has grown over the years, indicating capital accumulation. However, the equity ratio stands at around 35%, suggesting moderate leverage. Return on equity has fluctuated, with a ROE of 5.48% in 2023, reflecting modest efficiency in using equity to generate profits.
Cash Flow
50
Neutral
Cash flow statements indicate negative free cash flow and operating cash flow, reflecting cash management challenges. There is no data on free cash flow growth or its relation to net income due to missing values. The company shows reliance on financing activities, which may pose risks in maintaining liquidity.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
104.74B105.85M20.95M42.66M25.88M
Gross Profit
104.74B21.23M19.14M21.47M10.56M
EBIT
40.10B75.25M54.22M37.12M21.19M
EBITDA
0.000.0069.24M0.0046.53M
Net Income Common Stockholders
45.84M17.53M14.49M33.57M20.19M
Balance SheetCash, Cash Equivalents and Short-Term Investments
20.06B26.13M892.78M44.17M18.48M
Total Assets
980.90B908.09M898.18M821.26M674.91M
Total Debt
420.70B575.83M604.13M518.17M393.20M
Net Debt
400.64B549.71M556.09M474.00M374.73M
Total Liabilities
610.98B588.15M622.41M536.15M401.55M
Stockholders Equity
369.92B319.94M275.78M285.11M273.36M
Cash FlowFree Cash Flow
-28.65M-17.27M-56.29M-76.10M-3.49M
Operating Cash Flow
-28.65M-17.27M-56.29M-76.10M-3.49M
Investing Cash Flow
0.000.00-83.46T-99.64B-23.38B
Financing Cash Flow
22.58M-4.65M60.16M101.80M5.83M

Stellus Capital Technical Analysis

Technical Analysis Sentiment
Negative
Last Price12.64
Price Trends
50DMA
14.36
Negative
100DMA
13.84
Negative
200DMA
13.39
Negative
Market Momentum
MACD
-0.07
Negative
RSI
43.56
Neutral
STOCH
14.60
Positive
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 12.64 is below the 20-day moving average (MA) of 13.93, below the 50-day MA of 14.36, and below the 200-day MA of 13.39, indicating a bearish trend. The MACD of -0.07 indicates Negative momentum. The RSI at 43.56 is Neutral, neither overbought nor oversold. The STOCH value of 14.60 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SCM.

Stellus Capital Risk Analysis

Stellus Capital disclosed 92 risk factors in its most recent earnings report. Stellus Capital 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

Stellus Capital Peers Comparison

Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
76
Outperform
$14.73B8.8212.40%8.92%19.95%-10.57%
74
Outperform
$4.95B9.5619.26%5.36%51.80%12.05%
72
Outperform
$1.34B20.803.96%14.65%-28.04%-69.52%
SCSCM
67
Neutral
$375.37M7.6213.29%11.73%17.67%128.48%
63
Neutral
$14.39B9.818.95%4.37%16.38%-11.64%
58
Neutral
$667.01M-8.57%16.20%8.24%-207.60%
53
Neutral
$458.38M28.113.28%13.39%-66.59%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
SCM
Stellus Capital
12.64
0.78
6.58%
MAIN
Main Street Capital
51.48
7.26
16.42%
PNNT
Pennantpark Investment
6.44
0.35
5.75%
ARCC
Ares Capital
19.97
1.20
6.39%
TCPC
BlackRock TCP Capital
7.08
-1.59
-18.34%
GSBD
Goldman Sachs BDC
10.59
-2.41
-18.54%

Stellus Capital Earnings Call Summary

Earnings Call Date: Mar 4, 2025 | % Change Since: -15.56% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a balanced view with significant achievements such as reaching a record portfolio size and maintaining dividend levels. However, challenges like a decline in net asset value, nonaccrual loans, and potential tariff risks present concerns. The sentiment is thus neutral, as positive growth is tempered by these challenges.
Highlights
Record Portfolio Size
The portfolio reached $1 billion for the first time in the company's history, indicating significant growth.
Equity Realizations
The company realized equity gains of $5.5 million in the fourth quarter and expects $4 million to $5 million in equity gains by June 30, 2025.
Dividend Sustainability
The company declared a dividend for the first quarter of 2025 at a rate of $0.40 per share, with expectations to maintain this level throughout the year.
Strong Origination Activity
Invested $76.5 million in nine new and portfolio companies during the fourth quarter, indicating robust investment activity.
Lowlights
Net Asset Value Decline
Net asset value per share decreased by $0.09 during the quarter due to net unrealized depreciation on the investment portfolio.
Nonaccrual Loans
Loans to seven portfolio companies are on nonaccrual, comprising 5.4% of the fair value of the total loan portfolio.
Dividend Coverage Concerns
First quarter earnings are not expected to fully cover the dividend, with a shortfall anticipated to continue throughout the year.
Potential Tariff and Government-Related Risks
Concerns about potential impacts from tariffs and government-related activities, with up to 10% of the portfolio potentially affected, though the impact is not expected to be material.
Company Guidance
During the conference call, Stellus Capital Investment Corporation provided detailed financial guidance and performance metrics for its fourth fiscal quarter ending December 31, 2024. The company reported a GAAP net investment income of $0.35 per share and core net investment income of $0.37 per share, excluding estimated excise taxes. The net asset value per share decreased by $0.09 due to net unrealized depreciation and reduction of spillover income, offset by net realized gains. The investment portfolio increased to $953.5 million across 105 companies. New investments totaled $76.5 million, and the company received $46.9 million in repayments. Stellus Capital's current portfolio includes 98% secured loans and 95% floating rate loans, with average loan size per company at $9.5 million. The company's leverage remains conservative, and it declared a $0.40 per share dividend for the first quarter of 2025, expected to continue throughout the year. Realized equity gains were $5.5 million in the fourth quarter, with further gains anticipated in 2025. The company also plans to maintain its leverage at a target of one-to-one and is progressing towards obtaining a third SBA license.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.