Stellus Capital (SCM) AI Stock Analysis

• Market Cap: $369.95M
• Dividend Yield: 12.83%
• Average Volume (3M): 143.74K
• Price to Earnings (P/E): 11.9
• Beta (1Y): 0.49
• Revenue Growth: 90.34%
• EPS Growth: -44.25%
• Country: US
• Employees: N/A
• Sector: Financial
• Sector Strength: 70
• Industry: Asset Management
• EPS (TTM): 0.32
• Shares Outstanding: 28,947,254
• 10 Day Avg. Volume: 140,067
• 30 Day Avg. Volume: 143,742
• PEG Ratio: 0.06
• Price to Book (P/B): 0.95
• Price to Sales (P/S): 4.26
• P/FCF Ratio: -12.29
• Enterprise Value/Market Cap: 2.68
• Enterprise Value/Revenue: 14.30
• Enterprise Value/Gross Profit: 27.68
• Enterprise Value/Ebitda: 30.59
• 1Y Price Target: $13.00
• Price Target Upside: 3.17% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 1
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 60 Neutral
• Price Target: $13.00 ▲(3.17% Upside)

The score is most constrained by weak cash conversion (negative operating and free cash flow across periods) and moderate leverage despite strong reported margins. Valuation is a positive (modest P/E and very high dividend yield), while technicals are neutral-to-slightly positive and the latest earnings call was balanced (portfolio growth and improved financing terms offset by NAV decline and spread pressure).

Positive Factors

Record Portfolio Size

Achieving a record portfolio size demonstrates Stellus Capital's ability to expand its investment reach and manage a larger asset base, which can enhance revenue generation and market presence over time.

Strong Origination Activity

Robust origination activity signifies Stellus Capital's effective deal sourcing and execution capabilities, which are crucial for sustaining growth and diversifying income streams in the long term.

Dividend Sustainability

Maintaining a consistent dividend payout reflects financial stability and management's commitment to returning value to shareholders, which can enhance investor confidence and support stock performance.

Negative Factors

Net Asset Value Decline

A decline in net asset value indicates potential weaknesses in asset quality or valuation, which could impact the company's financial health and investor perception if not addressed.

Nonaccrual Loans

Nonaccrual loans represent credit risk and potential losses, challenging Stellus Capital's ability to generate consistent income and maintain portfolio quality, which is crucial for long-term stability.

Dividend Coverage Concerns

Inability to fully cover dividends from earnings may indicate cash flow issues, potentially leading to future dividend cuts or financial strain, affecting investor trust and stock attractiveness.

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 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

Strong reported profitability and very high net margins are offset by a major cash-flow weakness (negative operating cash flow and free cash flow across all periods) and a moderately levered balance sheet with inconsistent returns, plus a recent TTM revenue decline.

Income Statement

SCM shows strong profitability on both an annual and TTM (Trailing-Twelve-Months) basis, with very high net margins (TTM ~44% and 2024 ~55%). Revenue growth has been volatile—strong in 2023 and 2024, but down ~10% in TTM—suggesting earnings quality is solid but the top line is not consistently expanding. Overall, profitability is a clear strength, while the recent revenue contraction and variability are key risks.

Balance Sheet

Leverage is meaningful, with debt running around ~1.2x equity in TTM (Trailing-Twelve-Months) and ~1.6x in 2024, which is manageable but reduces flexibility in weaker markets. Equity has been relatively stable and assets have grown versus earlier years, but returns to shareholders are inconsistent (stronger in 2024, extremely low in TTM). Overall, the balance sheet is adequate but not conservative, with leverage and uneven returns as the main constraints.

Cash Flow

Cash generation is the primary weakness: operating cash flow and free cash flow are negative across every period shown (including TTM (Trailing-Twelve-Months) and each annual year). While the rate of change in free cash flow improves in some years, the company is still not consistently converting profits into cash, which can increase reliance on financing and raise liquidity risk during downturns.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	69.44M	82.72M	53.24M	45.42M	61.38M	41.83M
Gross Profit	35.88M	51.21M	21.23M	20.95M	42.66M	25.88M
EBITDA	32.47M	47.46M	16.01M	15.87M	37.12M	21.19M
Net Income	30.52M	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	9.02M	20.06M	26.13M	48.04M	44.17M	18.48M
Total Debt	632.32M	593.01M	575.83M	604.13M	518.17M	393.20M
Total Liabilities	650.91M	610.98M	588.15M	622.41M	536.15M	401.55M
Stockholders Equity	377.73M	369.92M	319.94M	275.78M	285.11M	273.36M
Cash Flow
Free Cash Flow	-65.24M	-28.65M	-17.27M	-56.29M	-76.10M	-3.49M
Operating Cash Flow	-65.24M	-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	35.68M	22.58M	-4.65M	60.16M	101.80M	5.83M

Stellus Capital Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 12.60
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• 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 Neutral. The current price of 12.6 is below the 20-day moving average (MA) of 12.88, above the 50-day MA of 12.44, and below the 200-day MA of 12.61, indicating a neutral trend. The MACD of 0.09 indicates Positive momentum. The RSI at 51.62 is Neutral, neither overbought nor oversold. The STOCH value of 24.84 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for SCM.

Stellus Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
GLAD	70 Outperform	$465.64M	8.19	11.86%	9.31%	41.12%	-40.68%
TPVG	69 Neutral	$240.78M	7.29	9.43%	17.28%	206.13%	298.86%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
SSSS	67 Neutral	$234.61M	3.95	35.45%	5.39%	―	―
CION	63 Neutral	$480.54M	18.44	3.22%	15.77%	-11.01%	-65.56%
SCM	60 Neutral	$369.95M	11.90	8.20%	12.83%	90.34%	-44.25%
PNNT	54 Neutral	$380.68M	11.67	6.83%	16.61%	-3.09%	200.66%

Stellus Capital Corporate Events

Stellus Capital Announces Full Redemption of 2026 Notes

On November 24, 2025, Stellus Capital Investment Corporation announced its decision to redeem 100% of its remaining outstanding 4.875% Notes due 2026. This follows a previous redemption of 50% of these notes on September 30, 2025. The full redemption, amounting to $50,000,000, will occur on December 31, 2025, and includes accrued and unpaid interest. This strategic financial move is likely to impact the company’s debt management and financial positioning.

The most recent analyst rating on (SCM) stock is a Hold with a $13.00 price target. To see the full list of analyst forecasts on Stellus Capital stock, see the SCM Stock Forecast page.