Capital Southwest (CSWC) versus Its Competitors Head to Head Analysis

Capital Southwest (NASDAQ: CSWC) is one of 35 publicly-traded companies in the “Investors, not elsewhere classified” industry, but how does it compare to its rivals? We will compare Capital Southwest to similar businesses based on the strength of its dividends, profitability, earnings, institutional ownership, risk, valuation and analyst recommendations.

Analyst Ratings

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This is a summary of recent ratings and target prices for Capital Southwest and its rivals, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capital Southwest 0 1 4 0 2.80
Capital Southwest Competitors 110 529 528 20 2.39

Capital Southwest presently has a consensus price target of $20.00, indicating a potential upside of 18.98%. As a group, “Investors, not elsewhere classified” companies have a potential upside of 22.71%. Given Capital Southwest’s rivals higher possible upside, analysts plainly believe Capital Southwest has less favorable growth aspects than its rivals.

Insider & Institutional Ownership

56.6% of Capital Southwest shares are owned by institutional investors. Comparatively, 33.0% of shares of all “Investors, not elsewhere classified” companies are owned by institutional investors. 5.9% of Capital Southwest shares are owned by company insiders. Comparatively, 6.6% of shares of all “Investors, not elsewhere classified” companies are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Capital Southwest and its rivals’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capital Southwest 91.90% 5.46% 4.45%
Capital Southwest Competitors 81.06% 6.23% 2.85%

Volatility & Risk

Capital Southwest has a beta of 0.3, suggesting that its share price is 70% less volatile than the S&P 500. Comparatively, Capital Southwest’s rivals have a beta of -1.15, suggesting that their average share price is 215% less volatile than the S&P 500.

Dividends

Capital Southwest pays an annual dividend of $1.12 per share and has a dividend yield of 6.7%. Capital Southwest pays out 183.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. As a group, “Investors, not elsewhere classified” companies pay a dividend yield of 10.4% and pay out 106.8% of their earnings in the form of a dividend. Capital Southwest lags its rivals as a dividend stock, given its lower dividend yield and higher payout ratio.

Earnings and Valuation

This table compares Capital Southwest and its rivals top-line revenue, earnings per share and valuation.

Gross Revenue Net Income Price/Earnings Ratio
Capital Southwest $23.50 million $23.47 million 27.56
Capital Southwest Competitors $118.05 million $49.12 million 10.98

Capital Southwest’s rivals have higher revenue and earnings than Capital Southwest. Capital Southwest is trading at a higher price-to-earnings ratio than its rivals, indicating that it is currently more expensive than other companies in its industry.

Summary

Capital Southwest rivals beat Capital Southwest on 8 of the 15 factors compared.

About Capital Southwest

Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. It prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States. The firm seeks to make equity investments up to $5 million and debt investments between $5 million and $20 million and co-invest in transaction size upto $40 million. It prefers to invest in companies with revenues approaching above $10 million, profitable operations, historical growth rate of at least 15 percent per year, EBITDA between $3 million and $50 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.

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