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Stellus Capital (SCM)
NYSE:SCM
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Stellus Capital
(NYSE:SCM)
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Rating:64Neutral
Price Target:―
Stellus Capital's stock score is driven by moderate financial performance with growth potential but significant profitability and cash flow challenges. The valuation appears attractive with a low P/E ratio and high dividend yield. Technical indicators suggest a bearish trend, while the earnings call reflects a balanced outlook with both growth achievements and financial risks. Investors should consider the high dividend yield against the backdrop of financial uncertainties.
Stellus Capital (SCM) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$378.50M
Dividend Yield12.01%
Average Volume (3M)183.79K
Price to Earnings (P/E)9.3
Beta (1Y)0.52
Revenue Growth65.75%
EPS Growth14.28%
CountryUS
EmployeesN/A
SectorFinancial
Sector Strength70
IndustryAsset Management
Share Statistics
EPS (TTM)0.34
Shares Outstanding28,416,147
10 Day Avg. Volume240,208
30 Day Avg. Volume183,791
Financial Highlights & Ratios
PEG Ratio0.06
Price to Book (P/B)0.95
Price to Sales (P/S)3.36
P/FCF Ratio-12.29
Enterprise Value/Market Cap2.21
Enterprise Value/Revenue6.96
Enterprise Value/Gross Profit13.10
Enterprise Value/Ebitda6.93
Forecast
1Y Price Target
$14.00Price Target Upside5.11% Upside
Rating ConsensusHold
Number of Analyst Covering0
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:Aug 06, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 31, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mix of positive and negative aspects. On the positive side, there was increased investment activity, stable asset quality, progress on the SBIC III license, and stable dividends. However, concerns were raised about the decrease in net asset value, dividend coverage issues, and the presence of nonaccrual loans.Q2-2025 Updates
Positive Updates
Increased Investment Activity
Investment activity has picked up significantly in the past 30 days with $26 million of new fundings since June 30. The portfolio now stands at approximately $1 billion with 113 companies, marking the largest number in the company's history.
Stable Asset Quality
84% of the portfolio is rated a 1 or 2, indicating they are on or ahead of plan. There were no new loans added to the nonaccrual list during the quarter.
SBIC III License Progress
Received a greenlight letter from the Small Business Administration for Stellus Capital SBIC III, which is a significant step forward in obtaining the license.
Dividend Stability
Declared a dividend for the third quarter of $0.40 per share payable monthly, with expectations for the fourth quarter to maintain the same rate, subject to Board approval.
Negative Updates
Net Asset Value Decrease
Net asset value per share decreased by $0.04 during the quarter due to the reduction in spillover income.
Dividend Coverage Concerns
EPS has not covered the dividend for the last few quarters, raising questions about how much spillover income is left and strategies to increase leverage.
Nonaccrual Loans
Currently, loans to 5 portfolio companies are on nonaccrual, comprising 6.8% of total cost and 3.8% of fair value of the total loan portfolio.
Company Guidance
During the conference call, Stellus Capital Investment Corporation provided a detailed financial overview for the second fiscal quarter of 2025. The company reported a GAAP net investment income of $0.34 per share and core net investment income of $0.35 per share, with a slight decrease in net asset value per share by $0.04, attributed to reduced spillover income. Stellus Capital's investment portfolio at fair value stood at $985.9 million across 112 companies, a slight decline from $991 million across 110 companies in the previous quarter. The company issued approximately 300,000 shares for $3.9 million under its ATM program, contributing to a year-to-date issuance of 900,000 shares for $13.2 million. Portfolio quality remains strong, with 84% rated as 1 or 2, indicating on or ahead of plan, and 16% rated 3 or below, suggesting they are not meeting expectations. Stellus Capital expects a busy second half of the year, with $26 million in new fundings since June 30 and potential equity realizations of $12 million in proceeds and $10 million in gains. Dividends for the third quarter were declared at $0.40 per share, and the company anticipates maintaining this rate in the fourth quarter, subject to board approval. The company's leverage strategy remains stable at about 1:1 on the regulatory test, with a current leverage of 0.9x regulatory and 1.7x GAAP. The anticipated SBIC III license will enable Stellus Capital to further leverage its investment capacity.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 | 120.29M | 104.74M | 105.85M | 20.95M | 42.66M | 25.88M |
| Gross Profit | 63.94M | 55.24M | 21.23M | 19.14M | 21.47M | 10.56M |
| EBITDA | 120.94M | 78.72M | 0.00 | 69.24M | 0.00 | 46.53M |
| Net Income | 43.59M | 45.84M | 17.53M | 14.49M | 33.57M | 20.19M |
Balance Sheet | ||||||
| Total Assets | 1.03B | 980.90M | 908.09M | 898.18M | 821.26M | 674.91M |
| Cash, Cash Equivalents and Short-Term Investments | 39.99M | 20.06M | 26.13M | 48.04M | 44.17M | 18.48M |
| Total Debt | 638.31M | 593.01M | 575.83M | 604.13M | 518.17M | 393.20M |
| Total Liabilities | 659.39M | 610.98M | 588.15M | 622.41M | 536.15M | 401.55M |
| Stockholders Equity | 375.37M | 369.92M | 319.94M | 275.78M | 285.11M | 273.36M |
Cash Flow | ||||||
| Free Cash Flow | -33.26M | -28.65M | -17.27M | -56.29M | -76.10M | -3.49M |
| Operating Cash Flow | -33.26M | -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 | 37.38M | 22.58M | -4.65M | 60.16M | 101.80M | 5.83M |
Stellus Capital Technical Analysis
Negative
13.32
Price Trends
14.28
Negative
13.83
Negative
13.46
Negative
Market Momentum
-0.25
Positive
25.46
Positive
6.16
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 13.32 is below the 20-day moving average (MA) of 14.18, below the 50-day MA of 14.28, and below the 200-day MA of 13.46, indicating a bearish trend. The MACD of -0.25 indicates Positive momentum. The RSI at 25.46 is Positive, neither overbought nor oversold. The STOCH value of 6.16 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 (68)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | 252.51M | 10.66 | ― | 11.48% | ― | ― | |
68 Neutral | ― | 9.84 | ― | 13.66% | -1.64% | 104.07% | |
64 Neutral | $378.50M | 9.28 | 10.88% | 12.01% | 65.75% | 14.28% | |
58 Neutral | 311.91M | 5.98 | 17.16% | 6.41% | 18.36% | 17.28% | |
55 Neutral | 389.69M | 22.63 | 8.86% | 14.10% | 0.36% | -80.23% | |
48 Neutral | 436.18M | 31.21 | ― | 14.37% | -35.46% | -67.15% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% |
* Financial Sector Average
Performance Comparison
SCM
Stellus Capital
13.32
0.98
7.94%
NEWT
Newtek Business
11.85
0.17
1.46%
PNNT
Pennantpark Investment
6.68
0.59
9.69%
SAR
Saratoga Investment
24.38
4.13
20.40%
LIEN
Chicago Atlantic BDC
11.06
1.30
13.32%
PSBD
Palmer Square Capital BDC Inc.
12.13
-2.31
-16.00%
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.