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Stellus Capital (SCM)
NYSE:SCM
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Stellus Capital
(NYSE:SCM)
Rating:64Neutral
Price Target:―
Stellus Capital (SCM) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$385.89M
Dividend Yield11.78%
Average Volume (3M)123.45K
Price to Earnings (P/E)9.5
Beta (1Y)0.48
Revenue Growth17.67%
EPS Growth128.48%
CountryUS
EmployeesN/A
SectorFinancial
Sector Strength79
IndustryAsset Management
Share Statistics
EPS (TTM)0.35
Shares Outstanding28,416,147
10 Day Avg. Volume128,894
30 Day Avg. Volume123,447
Financial Highlights & Ratios
PEG Ratio-1.04
Price to Book (P/B)1.00
Price to Sales (P/S)0.00
P/FCF Ratio-5.50
Enterprise Value/Market Cap2.59
Enterprise Value/Revenue2.69
Enterprise Value/Gross Profit14.58
Enterprise Value/Ebitda5.97
Forecast
1Y Price Target
$13.50Price Target Upside-1.03% Downside
Rating ConsensusHold
Number of Analyst Covering2
Stellus Capital Business Overview & Revenue Model
Company DescriptionStellus 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 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 Earnings Call Summary
Earnings Call Date:May 12, 2025
(Q1-2025)
| % Change Since: 4.52%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mix of positive investment activity and portfolio growth against challenges such as reduced net asset value per share, non-accrual loans, and difficulties in covering dividends with net investment income. Despite strong asset management and potential for equity gains, the current economic factors and specific company challenges weigh on the outlook.Q1-2025 Updates
Positive Updates
Investment Activity and Portfolio Growth
In the first quarter, Stellus Capital invested $46.7 million in seven new portfolio companies, increasing the investment portfolio at fair value from $953.5 million to $991.1 million across 110 companies.
Equity Co-Investment Portfolio Potential
The company has an equity co-investment portfolio valued at $83 million with the potential for more than $10 million of equity gains by the end of the year.
Positive Asset Quality and Loan Security
98% of loans were secured, with 91% priced at floating rates, and the overall asset quality was slightly better than planned, with a decrease in non-accrual loans from the prior quarter.
Successful Equity Issuance
The ATM program was active, issuing 656,085 shares for $9.3 million at an average gross price of $14.11, all above net asset value.
Negative Updates
Net Asset Value Per Share Decrease
Net asset value per share decreased by $0.21 during the quarter due to company-specific write-downs in the loan portfolio and a reduction of spillover income.
Non-Accrual Loans
Currently, loans to five portfolio companies are on non-accrual, comprising 6.7% of total cost and 4% of fair value of the total loan portfolio.
Interest Income and Dividend Coverage
Adjusted net investment income was below the dividend payout, with expectations to remain below for the rest of the year due to current yield levels and the level of SOFR.
Reduced Pipeline Activity
The pipeline for new opportunities is slower than three months ago due to market disruptions, primarily attributed to tariff activities affecting M&A.
Company Guidance
In the recent earnings call, Stellus Capital Investment Corporation provided guidance for the upcoming quarters. They expect their portfolio size to remain approximately $985 million by the end of the second quarter of 2025, with new loan originations balancing out repayments. The company highlighted a strong first quarter for equity issuance under its ATM program, with 656,085 shares issued at an average price of $14.11, all above net asset value. Stellus Capital also declared a dividend of $0.40 per share for the second quarter, with an expectation to maintain this rate in the third quarter, subject to Board approval. The potential for over $10 million in equity gains by year-end was noted. Furthermore, Stellus Capital received a green light letter from the Small Business Administration for Stellus Capital SBIC III, anticipating continued leverage use under this license for portfolio investments. They also issued $75 million in principal amount notes at 7.25% due 2030 to repay a bank facility, indicating strategic efforts to manage capital structure effectively.Stellus Capital Financial Statement Overview
Summary
Stellus Capital has demonstrated revenue growth potential, but profitability issues and cash flow management challenges persist. The high leverage and inconsistent income generation pose risks to financial stability. Improvements in cost management and cash flow optimization are essential.Income Statement
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.65
Positive
Balance Sheet
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.70
Positive
Cash Flow
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.50
Neutral
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 124.08M | 104.74M | 105.85M | 20.95M | 42.66M | 25.88M | Gross Profit |
| 68.45M | 55.24M | 21.23M | 19.14M | 21.47M | 10.56M | EBIT |
| 27.14M | 40.10M | 75.25M | 54.22M | 37.12M | 21.19M | EBITDA |
| 98.10M | 78.72M | 0.00 | 69.24M | 0.00 | 46.53M | Net Income Common Stockholders |
| 41.99M | 45.84M | 17.53M | 14.49M | 33.57M | 20.19M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 35.03M | 20.06M | 26.13M | 48.04M | 44.17M | 18.48M | Total Assets |
| 649.06M | 980.90M | 908.09M | 898.18M | 821.26M | 674.91M | Total Debt |
| 414.88M | 593.01M | 575.83M | 604.13M | 518.17M | 393.20M | Net Debt |
| 379.86M | 572.95M | 549.71M | 556.09M | 474.00M | 374.73M | Total Liabilities |
| 424.14M | 610.98M | 588.15M | 622.41M | 536.15M | 401.55M | Stockholders Equity |
| 224.92M | 369.92M | 319.94M | 275.78M | 285.11M | 273.36M |
| Cash Flow | Free Cash Flow | ||||
| -70.03M | -28.65M | -17.27M | -56.29M | -76.10M | -3.49M | Operating Cash Flow |
| -70.03M | -28.65M | -17.27M | -56.29M | -76.10M | -3.49M | Investing Cash Flow |
| 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | Financing Cash Flow |
| 32.16M | 22.58M | -4.65M | 60.16M | 101.80M | 5.83M |
Stellus Capital Technical Analysis
Positive
13.64
Price Trends
12.92
Positive
13.52
Positive
13.20
Positive
Market Momentum
0.13
Negative
62.64
Neutral
77.89
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SCM, the sentiment is Positive. The current price of 13.64 is above the 20-day moving average (MA) of 13.32, above the 50-day MA of 12.92, and above the 200-day MA of 13.20, indicating a bullish trend. The MACD of 0.13 indicates Negative momentum. The RSI at 62.64 is Neutral, neither overbought nor oversold. The STOCH value of 77.89 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $229.69M | 11.64 | 8.67% | 12.10% | ― | ― | |
68 Neutral | $359.54M | 11.93 | 7.36% | 12.46% | -24.05% | 28.25% | |
65 Neutral | $294.50M | 5.86 | 18.18% | 6.97% | 21.99% | 23.40% | |
64 Neutral | $12.85B | 9.81 | 7.79% | 78.20% | 12.23% | -7.93% | |
64 Neutral | $385.89M | 9.50 | 10.83% | 11.78% | 17.67% | 128.48% | |
54 Neutral | $450.96M | 27.69 | 3.05% | 11.68% | 1.13% | -86.09% | |
48 Neutral | $448.58M | 46.45 | 1.95% | 13.97% | ― | -66.59% |
* Financial Sector Average
Performance Comparison
SCM
Stellus Capital
13.64
1.34
10.89%
NEWT
Newtek Business
11.01
-1.13
-9.31%
PNNT
Pennantpark Investment
6.88
0.24
3.61%
SAR
Saratoga Investment
24.14
3.67
17.93%
LIEN
Chicago Atlantic BDC
10.08
-0.54
-5.08%
PSBD
Palmer Square Capital BDC Inc.
13.86
-0.80
-5.46%
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.