Sixth Street Specialty Lending (TSLX) AI Stock Analysis

• Market Cap: $2.28B
• Dividend Yield: 8.58%
• Average Volume (3M): 425.32K
• Price to Earnings (P/E): 12.0
• Beta (1Y): 0.56
• Revenue Growth: -6.29%
• EPS Growth: -15.46%
• Country: US
• Employees: N/A
• Sector: Financial
• Sector Strength: 72
• Industry: Asset Management
• EPS (TTM): 0.56
• Shares Outstanding: 94,240,350
• 10 Day Avg. Volume: 398,442
• 30 Day Avg. Volume: 425,320
• PEG Ratio: -0.47
• Price to Book (P/B): 1.22
• Price to Sales (P/S): 4.31
• P/FCF Ratio: -43.09
• Enterprise Value/Market Cap: 1.72
• Enterprise Value/Revenue: 8.58
• Enterprise Value/Gross Profit: 15.42
• Enterprise Value/Ebitda: 12.61
• 1Y Price Target: $24.25
• Price Target Upside: 0.00%
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 8

• Rating: 76 Outperform
• Price Target: $27.00 ▲(11.34% Upside)

Sixth Street Specialty Lending's strong earnings call performance and attractive valuation are the most significant factors driving the score. While financial performance is solid, revenue contraction and cash flow volatility are concerns. Technical indicators are neutral, and recent corporate events are positive.

Positive Factors

Credit Quality

Non-accruals totaled 2.1% of the portfolio at cost, compared to 3.7% of the portfolio last quarter, indicating an improvement in credit quality.

Dividend Sustainability

The total dividend in Q2 was $0.52/share, with core dividend coverage at 121%, reflecting strong dividend sustainability.

Financial Performance

Sixth Street (TSLX) reported another strong quarter, highlighting its differentiated platform, strong risk management, and solid liquidity.

Negative Factors

NOI Conversion

NOI conversion overall has lagged, averaging 76% for the past four quarters.

Sixth Street Specialty Lending Business Overview & Revenue Model

Company Description

Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance and lending to middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.

How the Company Makes Money

Sixth Street Specialty Lending generates revenue primarily through interest income on its debt investments, which include first-lien and second-lien loans, as well as mezzanine debt. These loans typically come with higher interest rates compared to traditional bank financing, allowing TSLX to capture substantial yield. Additionally, the company may earn fees for structuring and arranging loans, and it can also generate income through equity investments in some of its portfolio companies. The firm's revenue model is supported by its strategic partnerships with private equity firms and other financial institutions, which help in sourcing quality investment opportunities and enhancing its deal flow.

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

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

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

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.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	457.60M	455.10M	421.10M	323.72M	319.50M	270.04M
Gross Profit	254.59M	364.62M	328.92M	259.71M	236.04M	270.04M
EBITDA	311.15M	193.12M	0.00	26.44M	137.06M	227.75M
Net Income	187.60M	186.57M	222.02M	108.05M	211.78M	178.11M
Balance Sheet
Total Assets	3.42B	3.58B	3.34B	2.84B	2.55B	2.34B
Cash, Cash Equivalents and Short-Term Investments	39.17M	4.97M	1.22M	10.21M	1.57M	2.46M
Total Debt	1.73B	1.90B	1.78B	1.44B	1.19B	1.11B
Total Liabilities	1.80B	1.97B	1.85B	1.50B	1.28B	1.18B
Stockholders Equity	1.62B	1.61B	1.50B	1.34B	1.28B	1.16B
Cash Flow
Free Cash Flow	171.74M	187.25M	191.97M	71.83M	112.62M	135.97M
Operating Cash Flow	171.74M	187.25M	191.97M	71.83M	112.62M	135.97M
Investing Cash Flow	66.16M	-232.74M	-428.76M	-296.37M	-110.17M	9.10M
Financing Cash Flow	-233.38M	47.62M	236.34M	234.21M	241.00K	-145.94M

Sixth Street Specialty Lending Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 24.25
• 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 TSLX, the sentiment is Positive. The current price of 24.25 is above the 20-day moving average (MA) of 24.07, above the 50-day MA of 24.01, and above the 200-day MA of 21.68, indicating a bullish trend. The MACD of 0.06 indicates Positive momentum. The RSI at 53.95 is Neutral, neither overbought nor oversold. The STOCH value of 44.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSLX.

Sixth Street Specialty Lending Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TSLX	76 Outperform	$2.28B	12.01	11.66%	8.58%	-6.29%	-15.46%
CSWC	74 Outperform	$1.26B	14.07	9.74%	10.14%	12.82%	-5.37%
GSBD	71 Outperform	$1.30B	9.11	9.36%	15.34%	-55.16%	47.09%
Sector *	68 Neutral	$17.82B	11.90	10.30%	3.72%	9.69%	0.80%
BCSF	66 Neutral	$1.01B	9.26	9.42%	11.56%	-3.29%	-16.86%
NMFC	65 Neutral	$1.11B	13.66	6.18%	12.52%	39.05%	-32.62%
HTGC	64 Neutral	$3.51B	12.66	12.81%	9.74%	-15.88%	-13.91%

Sixth Street Specialty Lending Corporate Events

Sixth Street Reports Strong Q2 2025 Financial Results

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.

Sixth Street Appoints John D. Hershey to Board

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.

Sixth Street Approves Share Issuance Below Net Value

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.

Sixth Street Specialty Lending Holds Annual Stockholder Meeting

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.