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Investing.com - Clear Street has upgraded Capital Southwest Corp (NASDAQ:CSWC) from Hold to Buy with a price target of $22.00, citing the company’s durable earnings power and disciplined underwriting despite tightening credit spreads. Currently trading at $19.97, CSWC shows strong financial health with an overall score of "GOOD" according to InvestingPro data.
The business development company delivered pre-tax net investment income (NII) of $0.61 per share in its latest quarter, resulting in a 14.7% NII yield. Portfolio yield decreased slightly due to spread compression and some new non-accruals, but credit quality remained strong with non-performing loans steady at just 1.0% of fair value. CSWC’s diluted EPS stands at $1.62 for the last twelve months, with a moderate P/E ratio of 12.2.
Capital Southwest maintained robust deployment with $245 million in new commitments across 17 transactions. The company’s liquidity position was strengthened by a $350 million unsecured notes offering, while borrowers demonstrated healthy 3.6x interest coverage. InvestingPro data confirms this strong liquidity position, showing liquid assets exceed short-term obligations with an impressive current ratio of 41.18.
Net asset value (NAV) increased slightly despite a restructuring-related loss from a non-performing loan. The company maintains undistributed taxable income plus potential unrealized equity gains that support its supplemental dividend capacity. InvestingPro highlights that CSWC has maintained dividend payments for 43 consecutive years and currently offers a substantial 20.11% dividend yield.
Clear Street’s $22 price target is supported by a 1.3x forward price-to-NAV ratio and an 11.6% target dividend yield, with the upgrade reflecting durable earnings, strong credit performance, and potential strategic catalysts including the pursuit of a strategic partner to scale its investment platform. With revenue growth of 11.39% and a market cap of $1.11 billion, CSWC demonstrates the financial stability that supports its investment proposition. For deeper insights and comprehensive analysis, check out the Pro Research Report available on CSWC’s page on InvestingPro.
In other recent news, Capital Southwest Corporation reported its second-quarter earnings for 2025, showing mixed results. The company’s earnings per share (EPS) were $0.57, which was below the forecasted $0.5942, resulting in a 4.07% negative surprise. On a positive note, Capital Southwest’s revenue reached $56.95 million, exceeding expectations of $55.54 million and marking a 2.54% positive surprise. These developments highlight the company’s ongoing financial performance in the current fiscal year.
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