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Sixth Street Specialty Lending, Inc. (TSLX)
:TSLX
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Sixth Street Specialty Lending (TSLX) AI Stock Analysis

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TSLX

Sixth Street Specialty Lending

(NYSE:TSLX)

Rating:75Outperform
Price Target:
$27.00
â–²(13.68% Upside)
Sixth Street Specialty Lending's overall score is driven by strong earnings call performance and attractive valuation metrics. While financial performance and technical indicators are solid, potential risks from revenue contraction and market challenges remain.
Positive Factors
Dividend Coverage
Dividend coverage remains a standout, with a base dividend coverage ratio of 132% in the quarter and a total dividend coverage ratio of 115%.
Earnings
Management expressed confidence in the company's earnings power and its ability to withstand competition.
Financial Performance
Activity-related fee income remained elevated, which supports strong financial performance.
Financial Strategy
The new bond issuance was well-timed, offering best-in-class pricing, which is beneficial for the company's financial strategy.
Negative Factors
NOI Conversion
NOI conversion overall has lagged, averaging 76% for the past four quarters.

Sixth Street Specialty Lending (TSLX) vs. SPDR S&P 500 ETF (SPY)

Sixth Street Specialty Lending Business Overview & Revenue Model

Company DescriptionSixth Street Specialty Lending, Inc. (TSLX) is a specialty finance company that operates as a business development company (BDC). It primarily focuses on providing flexible and customized debt financing solutions to middle-market companies across various industries in the United States. The company offers a broad range of capital solutions, including first lien, second lien, mezzanine, and unitranche loans, as well as equity co-investments.
How the Company Makes MoneySixth Street Specialty Lending makes money primarily through the interest and fees earned on the loans and debt financing it provides to middle-market companies. As a business development company, TSLX lends capital to companies that may not have easy access to traditional financing sources, thereby charging interest rates that reflect the risk and bespoke nature of its financial products. Revenue streams include interest income from its loan portfolio, fee income from loan origination and structuring, and potentially capital gains from equity co-investments. The company's earnings are influenced by the credit quality of its borrowers, interest rate environment, and its ability to effectively deploy and manage its capital. Additionally, as part of the broader Sixth Street Partners ecosystem, TSLX benefits from synergies and shared expertise, enhancing its deal sourcing and risk management capabilities.

Sixth Street Specialty Lending Earnings Call Summary

Earnings Call Date:Jul 30, 2025
(Q2-2025)
|
% Change Since: 0.38%|
Next Earnings Date:Nov 04, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance with improvements in nonaccruals and robust dividend coverage. Despite challenges in the M&A and leveraged loan markets, the company showed resilience with increased net asset value and successful restructuring of portfolio companies.
Q2-2025 Updates
Positive Updates
Strong Financial Performance
Adjusted net investment income of $0.56 per share, exceeding the base dividend by 22%, with an annualized return on equity of 13.1%.
Improvement in Nonaccruals
Nonaccruals improved from 1.2% to 0.6% of the portfolio at fair value, showing recovery in credit quality.
Robust Dividend Coverage
The adjusted net investment income in Q2 exceeded the base dividend by 22%, demonstrating strong dividend coverage.
Increase in Net Asset Value
Net asset value per share increased by 70 basis points from $17.04 to $17.17, reflecting positive financial performance.
Successful Restructuring of Portfolio Companies
The restructuring of Lithium Technologies resulted in the removal from nonaccrual status without material impact on net asset value.
Strong Economic Return
Generated a total economic return of 42.6%, significantly higher than the 19.1% average of public BDC peers.
Negative Updates
Muting M&A Environment
M&A market activity was down approximately 31% in the second quarter, marking the lowest levels since Q4 2023.
Challenges in the Leveraged Loan Market
The leveraged loan market showed decreased activity, directly impacting the company's transactional environment.
Company Guidance
During the earnings call for Sixth Street Specialty Lending, Inc. for the second quarter ended June 30, 2025, the company provided comprehensive guidance involving various financial metrics. The adjusted net investment income was reported at $0.56 per share, reflecting an annualized return on equity of 13.1%, while the adjusted net income was $0.64 per share, corresponding to a 15.1% annualized return on equity. The call highlighted that the net asset value per share increased by 70 basis points to $17.17 from $17.04 as of March 31, 2025. The company also discussed a total economic return of 42.6% over the recent period, significantly outperforming the average of their public BDC peers, which was 19.1%. Sixth Street Specialty Lending noted improvements in credit quality with nonaccruals decreasing to 0.6% of the portfolio at fair value, and they declared a base quarterly dividend of $0.46 per share along with a supplemental dividend of $0.05 per share. Additionally, they reported strong dividend coverage, with adjusted net investment income in Q2 exceeding the base dividend by 22%. The company also expressed confidence in their ability to leverage their platform to source and execute differentiated investment opportunities, as demonstrated by a weighted average spread of 6.5% on new first lien investments compared to a sector average of 5.3% in Q1.

Sixth Street Specialty Lending Financial Statement Overview

Summary
Sixth Street Specialty Lending exhibits strong profitability with high net profit and EBIT margins. The balance sheet is stable, with a solid equity base and moderate leverage. However, revenue contraction and historical cash flow volatility pose risks.
Income Statement
78
Positive
Sixth Street Specialty Lending shows strong performance in its income statement, with a robust net profit margin of 50.13% and a high EBIT margin of 89.11% for TTM (Trailing-Twelve-Months). However, the revenue growth rate is negative, indicating a decrease in revenue compared to the previous year. The company maintains a healthy EBITDA margin of 81.07%.
Balance Sheet
72
Positive
The company has a solid equity base with an equity ratio of 47.35% and a relatively low debt-to-equity ratio of 1.07, indicating a moderate level of leverage. Return on Equity is impressive at 12.97%, signifying effective use of equity to generate profits. The balance sheet reflects a stable financial position, although there is a slight increase in total liabilities over the periods.
Cash Flow
65
Positive
Cash flow metrics reveal mixed results. The company has a positive free cash flow for TTM, demonstrating operational efficiency, but the free cash flow growth rate is unavailable due to previous negative cash flows. The operating cash flow to net income ratio is 0.82, implying a healthy conversion of income into cash, yet historical cash flow volatility poses a risk.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue457.60M455.10M421.10M323.72M319.50M270.04M
Gross Profit254.59M364.62M328.92M259.71M236.04M270.04M
EBITDA311.15M193.12M0.0026.44M137.06M227.75M
Net Income187.60M186.57M222.02M108.05M211.78M178.11M
Balance Sheet
Total Assets3.42B3.58B3.34B2.84B2.55B2.34B
Cash, Cash Equivalents and Short-Term Investments39.17M4.97M1.22M10.21M1.57M2.46M
Total Debt1.73B1.90B1.78B1.44B1.19B1.11B
Total Liabilities1.80B1.97B1.85B1.50B1.28B1.18B
Stockholders Equity1.62B1.61B1.50B1.34B1.28B1.16B
Cash Flow
Free Cash Flow171.74M187.25M191.97M71.83M112.62M135.97M
Operating Cash Flow171.74M187.25M191.97M71.83M112.62M135.97M
Investing Cash Flow66.16M-232.74M-428.76M-296.37M-110.17M9.10M
Financing Cash Flow-233.38M47.62M236.34M234.21M241.00K-145.94M

Sixth Street Specialty Lending Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price23.75
Price Trends
50DMA
23.58
Positive
100DMA
22.25
Positive
200DMA
21.28
Positive
Market Momentum
MACD
0.07
Positive
RSI
46.48
Neutral
STOCH
25.66
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSLX, the sentiment is Neutral. The current price of 23.75 is below the 20-day moving average (MA) of 24.28, above the 50-day MA of 23.58, and above the 200-day MA of 21.28, indicating a neutral trend. The MACD of 0.07 indicates Positive momentum. The RSI at 46.48 is Neutral, neither overbought nor oversold. The STOCH value of 25.66 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSLX.

Sixth Street Specialty Lending Risk Analysis

Sixth Street Specialty Lending disclosed 1 risk factors in its most recent earnings report. Sixth Street Specialty Lending reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Sixth Street Specialty Lending Peers Comparison

Overall Rating
UnderperformOutperform
Sector (67)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
77
Outperform
$3.54B12.8412.81%9.75%-15.88%-13.91%
75
Outperform
$1.24B15.318.52%12.20%13.86%-29.53%
75
Outperform
$2.24B11.8711.66%8.70%-6.29%-15.46%
71
Outperform
$1.31B25.753.27%15.69%-28.04%-69.52%
67
Neutral
$17.01B11.609.79%3.95%10.63%1.62%
66
Neutral
$957.46M8.889.42%12.23%12.24%-3.21%
65
Neutral
$1.08B13.656.18%12.57%-3.55%-20.43%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSLX
Sixth Street Specialty Lending
23.75
5.29
28.66%
CSWC
Capital Southwest
22.62
1.50
7.10%
HTGC
Hercules Capital
19.49
3.10
18.91%
NMFC
New Mountain Finance
10.33
-0.25
-2.36%
GSBD
Goldman Sachs BDC
11.13
-1.11
-9.07%
BCSF
Bain Capital Specialty Finance
14.76
0.94
6.80%

Sixth Street Specialty Lending Corporate Events

DividendsFinancial Disclosures
Sixth Street Reports Strong Q2 2025 Financial Results
Positive
Jul 30, 2025

On July 30, 2025, Sixth Street Specialty Lending announced its financial results for the second quarter of 2025, reporting a net investment income of $0.54 per share and a net income of $0.63 per share. The company declared a third-quarter base dividend of $0.46 per share and a second-quarter supplemental dividend of $0.05 per share. The company’s net asset value (NAV) per share increased to $17.17, driven by overearning of its base quarterly dividend and net unrealized gains from investments. The company’s portfolio saw significant investment activity, with new investment commitments totaling $297.7 million and a principal amount of new investments funded at $208.6 million. The portfolio’s fair value consisted primarily of first-lien debt investments, and the company maintained a strong position with a weighted average yield of 11.7% on debt and income-producing securities.

The most recent analyst rating on (TSLX) stock is a Buy with a $23.00 price target. To see the full list of analyst forecasts on Sixth Street Specialty Lending stock, see the TSLX Stock Forecast page.

Executive/Board Changes
Sixth Street Appoints John D. Hershey to Board
Positive
Jul 3, 2025

On June 30, 2025, Sixth Street Specialty Lending appointed John D. Hershey to its Board of Directors, filling the vacancy left by John Ross’s retirement. Hershey, a respected figure in the alternative asset management sector with extensive experience from his tenure at Oregon State Treasury, is expected to enhance the board’s expertise and contribute to the company’s continued value creation for stakeholders.

The most recent analyst rating on (TSLX) stock is a Buy with a $23.00 price target. To see the full list of analyst forecasts on Sixth Street Specialty Lending stock, see the TSLX Stock Forecast page.

Private Placements and FinancingShareholder Meetings
Sixth Street Approves Share Issuance Below Net Value
Neutral
Jun 20, 2025

On June 20, 2025, Sixth Street Specialty Lending held a special meeting of stockholders to vote on a proposal. The stockholders approved the proposal to allow the company to sell or issue shares of its common stock below the net asset value per share, subject to board approval and certain conditions. This decision could impact the company’s market strategy by providing flexibility in raising capital.

The most recent analyst rating on (TSLX) stock is a Buy with a $23.00 price target. To see the full list of analyst forecasts on Sixth Street Specialty Lending stock, see the TSLX Stock Forecast page.

Shareholder Meetings
Sixth Street Specialty Lending Holds Annual Stockholder Meeting
Neutral
May 23, 2025

On May 22, 2025, Sixth Street Specialty Lending, Inc. held its annual meeting of stockholders, where two proposals were considered. The stockholders elected Class II directors and ratified KPMG LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2025. Additionally, a special meeting of stockholders was convened on the same day but was adjourned due to insufficient quorum. The meeting is set to reconvene on June 20, 2025, with no changes to the proposal to be voted on.

The most recent analyst rating on (TSLX) stock is a Buy with a $23.00 price target. To see the full list of analyst forecasts on Sixth Street Specialty Lending stock, see the TSLX Stock Forecast page.

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.Date of analysis: Aug 05, 2025