Stellus Capital (SCM) AI Stock Analysis

• Market Cap: $354.31M
• Dividend Yield: 13.07%
• Average Volume (3M): 213.97K
• Price to Earnings (P/E): 11.2
• Beta (1Y): 0.46
• 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: 231,241
• 30 Day Avg. Volume: 213,975
• 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: 2.25
• Enterprise Value/Revenue: 11.49
• Enterprise Value/Gross Profit: 22.24
• Enterprise Value/Ebitda: 24.58
• 1Y Price Target: $13.00
• Price Target Upside: 8.33% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 2
• EPS Forecast (FY): 1.33
• Revenue Forecast (FY): $103.47M

• Rating: 64 Neutral
• 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.

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 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 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

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.

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.

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.

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	10.00T>	980.90M	908.09M	898.18M	821.26M	674.91M
Cash, Cash Equivalents and Short-Term Investments	9.02T	20.06M	26.13M	48.04M	44.17M	18.48M
Total Debt	10.00T>	593.01M	575.83M	604.13M	518.17M	393.20M
Total Liabilities	10.00T>	610.98M	588.15M	622.41M	536.15M	401.55M
Stockholders Equity	10.00T>	369.92M	319.94M	275.78M	285.11M	273.36M
Cash Flow
Free Cash Flow	-49.32M	-28.65M	-17.27M	-56.29M	-76.10M	-3.49M
Operating Cash Flow	-49.32M	-28.65M	-17.27M	-56.29M	-76.10M	-3.49M
Investing Cash Flow	-15.92M	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: 12.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• 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 is above the 20-day moving average (MA) of 11.88, below the 50-day MA of 12.25, and below the 200-day MA of 13.02, indicating a neutral trend. The MACD of -0.07 indicates Negative momentum. The RSI at 55.87 is Neutral, neither overbought nor oversold. The STOCH value of 79.54 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 Neutral	$476.94M	8.37	11.86%	10.82%	41.12%	-40.68%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
SCM	64 Neutral	$354.31M	11.24	8.20%	13.07%	90.34%	-44.25%
TPVG	59 Neutral	$257.35M	7.57	9.43%	17.74%	206.13%	298.86%
CION	58 Neutral	$519.81M	19.89	3.22%	16.34%	-11.01%	-65.56%
PNNT	48 Neutral	$395.69M	12.09	6.83%	15.84%	-3.09%	200.66%
SSSS	45 Neutral	$234.34M	5.05	35.45%	5.45%	―	―