Saratoga Investment Corp. (SAR) Stock Analysis and Metrics

Sector: Financial Services Industry: Asset Management CIK: 0001377936

Market Cap 140.48 Mn

P/B 1.01

P/E 10.48

P/S 3.81

ROIC (Qtr) 7.47

Div Yield % 11.07

Rev 1y % (Qtr) -11.80

Total Debt (Qtr) 764.68 Mn

Debt/Equity (Qtr) 1.85

Add ratio to table...

About

Saratoga Investment Corp., also known as SAR, is a specialty finance company that operates in the financial industry. The company's primary business activities involve providing customized financing solutions to middle-market businesses in the United States. These financing solutions are tailored to meet the unique needs of each business and are used to finance change of ownership transactions, strategic acquisitions, recapitalizations, and growth initiatives. Saratoga Investment Corp. primarily invests in senior and unitranche leveraged loans,...

Saratoga Investment Corp., also known as SAR, is a specialty finance company that operates in the financial industry. The company's primary business activities involve providing customized financing solutions to middle-market businesses in the United States. These financing solutions are tailored to meet the unique needs of each business and are used to finance change of ownership transactions, strategic acquisitions, recapitalizations, and growth initiatives. Saratoga Investment Corp. primarily invests in senior and unitranche leveraged loans, mezzanine debt, and equity issued by private U.S. middle-market companies.

The company generates revenue through its investments in leveraged loans, mezzanine debt, and equity. Leveraged loans are senior debt instruments that rank ahead of subordinated debt with below investment grade or "junk" ratings. These loans are secured by a first priority perfected security interest on the assets of the portfolio company and typically have a floating rate interest payment and a stated maturity of five to seven years. Mezzanine debt, on the other hand, is typically unsecured and subordinated to senior debt. It is often used to finance transactions that require a higher level of leverage than is typically available from traditional lenders.

Saratoga Investment Corp. is well-positioned within the industry due to its ability to provide customized financing solutions to middle-market businesses. This competitive advantage is bolstered by the company's experienced investment team and its ability to invest in a diversified portfolio of investments. The company's diversified portfolio provides a hedge against market volatility, making it an attractive option for businesses seeking financing solutions.

The company's customers include middle-market businesses across various industries, including manufacturing, healthcare, technology, and consumer goods. Saratoga Investment Corp.'s investments are used to finance a variety of transactions, including change of ownership transactions, strategic acquisitions, recapitalizations, and growth initiatives.

The names of the company's products and services include Saratoga CLO, a collateralized loan obligation (CLO) that invests in senior secured first lien term loans. As of February 29, 2024, the Saratoga CLO portfolio consisted of $640.8 million in aggregate principal amount of primarily senior secured first lien term loans. The weighted average maturity of the portfolio is 4.07 years.

Saratoga Investment Corp. is externally managed and advised by Saratoga Investment Advisors, LLC, a New York-based investment firm affiliated with Saratoga Partners, a middle-market private equity investment firm. The company's investment activities are externally managed, and its portfolio is comprised of investments in leveraged loans, mezzanine debt, and equity.

Investment thesis

Bull case

Cash reserves of 169.56M provide comfortable 37.64x coverage of tax obligations 4.50M, showing strong fiscal management.
Cash position of 169.56M fully covers payables of 9.97M by 17x, showing strong vendor relationship management.
Tangible assets of 1.20B provide robust 4410.70x coverage of receivables 271377, showing strong asset quality.

Bear case

Operating cash flow of (15.53M) provides thin coverage of dividend payments of (51.66M) with a 0.30 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
Operating cash flow of (15.53M) provides minimal -102.02x coverage of tax expenses of 152230, suggesting potential tax planning inefficiencies or unsustainable tax positions.
Free cash flow of (15.53M) represents just 0.24x of debt issuance (64.88M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
Operating cash flow of (15.53M) barely covers operating expenses of 5.18M with a -3 ratio, suggesting thin operational efficiency margins and limited flexibility.
Operating cash flow of (15.53M) is outpaced by equity issuance of 48.98M (-0.32 ratio), indicating concerning reliance on equity markets for funding operations.

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
EV to Assets EV to Assets	0.28	0.94
EV to Cash from Ops. EV/CFO	-7.58	41.10
EV to Debt EV to Debt	0.44	15.28
EV to EBIT EV/EBIT	13.72	23.47
EV to EBITDA EV/EBITDA	14.58	47.80
EV to Free Cash Flow [EV/FCF] EV/FCF	-7.58	38.62
EV to Market Cap EV to Market Cap	2.39	7.81
EV to Revenue EV/Rev	9.10	27.38
Price to Book Value [P/B] P/B	1.01	2.34
Price to Earnings [P/E] P/E	10.48	11.81

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	0.75	4.66
Dividend Payout Ratio % Div Payout % (Qtr)	147.90	-5.56
Dividend per Basic Share Div per Share (Qtr)	2.74	1.73
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	-284.23	49.83
Interest Coverage Int. cover (Qtr)	1.78	25.16

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex Growth (1y) %	0.00	-35.10
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	-32.22	15.43
Dividend Growth (1y) % Div 1y % (Qtr)	-16.97	1.65
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	2.90	-90.82
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	-20.75	35.24
EBIT Growth (1y) % EBIT 1y % (Qtr)	2.84	-22.13
EBT Growth (1y) % EBT 1y % (Qtr)	13.06	-163.05
EPS Growth (1y) % EPS 1y % (Qtr)	-3.59	-20.61
FCF Growth (1y) % FCF 1y % (Qtr)	-107.89	220.21
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	-18.13	-53.96

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	0.11	0.22
Cash Payout Ratio Cash Payout (Qtr)	-3.33	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)	1.85	0.70
Interest Cover Ratio Int Coverage (Qtr)	1.78	25.16
Times Interest Earned Times Interest Earned (Qtr)	1.78	25.16

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	70.20	-114.76
EBIT Margin % EBIT Margin % (Qtr)	70.18	-127.24
EBT Margin % EBT Margin % (Qtr)	30.74	-150.97
Gross Margin % Gross Margin % (Qtr)	78.80	67.88
Net Profit Margin % Net Margin % (Qtr)	30.60	-148.68

Research Tools

Saratoga Investment Corp. (NYSE: SAR)

About

Investment thesis

Bull case

Bear case

Peer comparison

Industry comparisons

Research Tools

Saratoga Investment Corp. (NYSE: SAR)

About

Investment thesis

Bull case

Bear case

Peer comparison

Industry comparisons

Create an account

Sign In

Reset Password