Capital Southwest Corp (NASDAQ: CSWC)

Sector: Financial Services Industry: Asset Management CIK: 0000017313
Market Cap 1.27 Bn
P/B 1.61
P/E 10.34
P/S 102.67
ROIC (Qtr) 9.58
Div Yield % 1.71
Rev 1y % (Qtr) 18.23
Total Debt (Qtr) 1.07 Bn
Debt/Equity (Qtr) 1.08
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About

Capital Southwest Corporation (CSWC), a Texas-based investment company, operates in the business development company (BDC) sector under the Investment Company Act of 1940. Its ticker symbol is CSWC. The company focuses on providing customized debt and equity financing to lower middle market (LMM) companies, primarily in the United States. CSWC's primary business activities involve offering flexible financing solutions to LMM companies in various industries. These financing options are designed to support growth, changes of control, or other corporate...

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Investment thesis

Bull case

  • Cash reserves of 44.21M provide comfortable 2.55x coverage of tax obligations 17.32M, showing strong fiscal management.
  • Tangible assets of 2.12B provide robust 57.50x coverage of receivables 36.80M, showing strong asset quality.

Bear case

  • Operating cash flow of (193.09M) provides thin coverage of dividend payments of (142.39M) with a 1.36 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • The company's operating cash flow of (193.09M) shows concerning coverage of stock compensation expenses of 6.36M, with a -30.36 ratio indicating potential earnings quality issues.
  • Free cash flow of (193.73M) provides weak coverage of capital expenditures of 633000, with a -306.04 ratio suggesting additional external financing needs for growth initiatives.
  • Operating cash flow of (193.09M) provides minimal -16.24x coverage of tax expenses of 11.89M, suggesting potential tax planning inefficiencies or unsustainable tax positions.
  • Free cash flow of (193.73M) represents just -1.33x of debt issuance 146.08M, suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Asset Management
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 BLK BlackRock, Inc. 199.59 Bn 85.40 21.98 15.04 Bn
2 BN BROOKFIELD Corp /ON/ 103.94 Bn 31.52 5.64 262.97 Bn
3 AMP Ameriprise Financial Inc 88.69 Bn 55.02 7.20 5.89 Bn
4 BX Blackstone Inc. 88.51 Bn 49.39 10.93 12.89 Bn
5 KKR KKR & Co. Inc. 55.86 Bn 28.33 13.23 53.12 Bn
6 STT State Street Corp 46.52 Bn 21.77 3.91 34.72 Bn
7 NTRS Northern Trust Corp 34.14 Bn 33.31 6.71 15.64 Bn
8 RJF Raymond James Financial Inc 32.89 Bn 37.63 4.14 5.10 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.05 0.94
EV to Cash from Ops. EV/CFO 108.00 41.10
EV to Debt EV to Debt 2.06 15.28
EV to EBIT EV/EBIT 18.17 23.47
EV to EBITDA EV/EBITDA 570.94 47.80
EV to Free Cash Flow [EV/FCF] EV/FCF 108.00 38.62
EV to Market Cap EV to Market Cap 1.75 7.81
EV to Revenue EV/Rev 179.36 27.38
Price to Book Value [P/B] P/B 1.61 2.34
Price to Earnings [P/E] P/E 10.34 11.81
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.72 4.66
Dividend Payout Ratio % Div Payout % (Qtr) 136.90 -5.56
Dividend per Basic Share Div per Share (Qtr) 2.75 1.73
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) -81.79 49.83
Interest Coverage Interest Coverage 0.00 25.16
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 50.55 -35.10
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 22.76 15.43
Dividend Growth (1y) % Div 1y % (Qtr) 8.85 1.65
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 55.11 -90.82
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 12.86 35.24
EBIT Growth (1y) % EBIT 1y % (Qtr) 59.27 -22.13
EBT Growth (1y) % EBT 1y % (Qtr) 59.27 -163.05
EPS Growth (1y) % EPS 1y % (Qtr) 32.62 -20.61
FCF Growth (1y) % FCF 1y % (Qtr) 26.03 220.21
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 14.25 -53.96
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.11 0.22
Cash Payout Ratio Cash Payout (Qtr) -0.74 0.36
Cash Ratio Cash Ratio 0.00 0.38
Current Ratio Current Ratio 0.00 0.86
Debt to Equity Ratio Debt/Equity (Qtr) 1.08 0.70
Interest Cover Ratio Interest Cover Ratio 0.00 25.16
Times Interest Earned Times Interest Earned 0.00 25.16
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 53.70 -114.76
EBIT Margin % EBIT Margin % (Qtr) 50.70 -127.24
EBT Margin % EBT Margin % (Qtr) 50.70 -150.97
Gross Margin % Gross Margin % (Qtr) 100.00 67.88
Net Profit Margin % Net Margin % (Qtr) 45.50 -148.68