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Tuesday, Capital Southwest Corporation’s (NASDAQ:CSWC) stock price target was reduced by Raymond (NSE:RYMD) James from $26.00 to $24.00, while the firm kept its Outperform rating on the shares. Currently trading at $22.75, the company boasts an attractive 11.4% dividend yield and has maintained dividend payments for 42 consecutive years. The adjustment followed the company’s third fiscal quarter results for 2025, which ended in December. These results surpassed the analyst’s expectations, credited to a rise in fee income and net portfolio growth that exceeded projections. InvestingPro data reveals several more key insights about Capital Southwest’s financial strength and growth potential.
According to the research firm, the business development company (BDC) demonstrated a modestly better performance than anticipated, which contributed to the decision to maintain the Outperform rating. With impressive revenue growth of 27.4% and a market capitalization of $1.14 billion, the company shows strong fundamental performance. The analyst at Raymond James highlighted the company’s above-forecast results, attributing the success to both increased fee income and net portfolio growth that outpaced their high expectations.
Capital Southwest’s net asset value (NAV) is projected to continue outperforming compared to its peers in the upcoming quarters. This optimism is partly based on the benefits expected from the company’s at-the-market (ATM) equity issuance program. The analyst expressed confidence in the program’s ability to contribute positively to the company’s financial metrics. InvestingPro’s Financial Health Score of 2.72 (GOOD) supports this positive outlook, with particularly strong scores in profitability and growth metrics.
The firm’s assessment of Capital Southwest also took into account the company’s leverage and return on equity (ROE). Capital Southwest was recognized for its lower leverage relative to the industry, which is seen as a factor that could lead to higher than average ROEs. This attribute, combined with the company’s strategic initiatives, has shaped Raymond James’ perspective on the risk/reward profile of Capital Southwest’s stock, which they find attractive.
The analyst’s commentary concluded with a positive outlook on Capital Southwest’s future performance. The maintained Outperform rating, despite the lowered price target, reflects a belief in the company’s ongoing potential to excel within its sector.
In other recent news, Capital Southwest Corp has been in the spotlight with important developments. Lucid (NASDAQ:LCID) Capital Markets initiated coverage on the company with a Neutral rating and a price target of $25.00, based on projections for the year 2025. The firm’s analysis suggests that Capital Southwest may trade at approximately 150% of its 2025 year-end Net Asset Value (NAV) estimate.
In addition to this, Capital Southwest has launched a public offering of unsecured convertible notes due in 2029, managed by Oppenheimer & Co. The company plans to use the net proceeds from this offering to redeem its 4.50% Notes due 2026, repay part of the outstanding debt under its senior secured revolving credit facility with ING Capital LLC, and for general corporate purposes.
Further, despite potential challenges to Net Investment Income due to decreasing short-term interest rates, analysts at Lucid Capital Markets do not anticipate a risk to the dividend. They also foresee the possibility of an economic soft landing and an improved lending environment, which could lead Capital Southwest to increase leverage in the future. These are some of the recent developments that have been influencing the company’s trajectory.
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