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Oaktree Specialty Lending (OCSL)
NASDAQ:OCSL
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Oaktree Specialty Lending
(NASDAQ:OCSL)
61Neutral
Positive Factors
Earnings
OCSL reported adjusted NOI of $0.55 per share, above the $0.53 estimate, helped by non-recurring items and discretionary incentive fee waivers.
Incentive Management Fees
OCSL voluntarily waived $1.2M of incentive management fees, which added to adjusted net investment income but was necessary to achieve full dividend coverage.
Negative Factors
Credit Quality
The number of investments on non-accrual status increased, indicating ongoing credit quality issues.
Dividend Sustainability
Oaktree Specialty Lending Corp. has minimal cushion on its dividend coverage, raising concerns about sustainability.
Net Asset Value
Net asset value continues to decline, driven by significant unrealized and realized losses.
Oaktree Specialty Lending (OCSL) vs. S&P 500 (SPY)
Market Cap
$1.28B
Dividend Yield14.08%
Average Volume (3M)886.05K
Price to Earnings (P/E)23.4
Beta (1Y)0.54
Revenue Growth-37.41%
EPS Growth-55.52%
CountryUS
EmployeesN/A
SectorFinancial
Sector Strength84
IndustryFinancial - Credit Services
Share Statistics
EPS (TTM)0.67
Shares Outstanding82,245,316
10 Day Avg. Volume1,015,483
30 Day Avg. Volume886,048
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.47
Price to Cash Flow (P/CF)2.20
P/FCF Ratio2.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$16.50Price Target Upside5.57% Upside
Rating ConsensusHold
Number of Analyst Covering3
Oaktree Specialty Lending Business Overview & Revenue Model
Company DescriptionOaktree Specialty Lending Corporation (OCSL) is a specialty finance company dedicated to providing customized capital solutions to middle-market companies across a variety of industries. Operating primarily within the financial services sector, OCSL is structured as a business development company (BDC) and focuses on offering flexible and tailored lending solutions. The company's core services include providing senior secured loans, mezzanine loans, and equity investments, aimed at helping businesses grow while generating attractive returns for its shareholders.
How the Company Makes MoneyOCSL makes money primarily through interest income generated from its portfolio of debt investments. As a BDC, the company lends capital to middle-market companies, charging interest on these loans, which serves as the main revenue stream. Additionally, OCSL may realize gains from equity investments, which can contribute to its earnings. The company also benefits from its strategic affiliation with Oaktree Capital Management, L.P., which provides management expertise and access to a broad network of industry contacts. This partnership can enhance deal flow and investment opportunities, ultimately supporting the company's revenue generation and growth.
Oaktree Specialty Lending Financial Statement Overview
Summary
Oaktree Specialty Lending shows a mixed financial picture. Strong gross profit margins and a robust balance sheet with no debt contribute positively. However, operational challenges are indicated by a negative EBIT margin and inconsistent revenue and free cash flow growth.Income Statement
Oaktree Specialty Lending shows a mixed financial performance. The TTM gross profit margin is strong at 84.81%, indicating efficient cost management. However, the net profit margin for TTM is modest at 23.97%, and a negative EBIT margin of -29.24% suggests operational challenges. Revenue growth is volatile, with a significant decline in the latest annual report, indicating potential revenue instability.60
Neutral
Balance Sheet
The company's balance sheet is robust with no debt, resulting in a favorable debt-to-equity ratio of 0. The equity ratio is stable at around 47%, indicating a solid equity base. However, the return on equity is relatively low at 3.77% TTM, suggesting limited profitability relative to equity.75
Positive
Cash Flow
Oaktree Specialty Lending's cash flow statement reveals strong operating cash flow with an impressive operating cash flow to net income ratio of 5.89 for TTM. However, free cash flow growth is inconsistent, with a significant drop in the latest annual report, indicating potential cash flow management issues.50
Neutral
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 227.83M | 346.25M | 379.29M | 39.11M | 248.31M | 52.31M |
| Gross Profit | |||||
| 193.14M | 346.25M | 302.83M | -16.54M | 176.90M | 13.06M |
| EBIT | |||||
| -66.62M | 338.93M | 292.42M | 79.79M | 240.84M | 37.45M |
| EBITDA | |||||
| 33.48M | 0.00 | -61.63M | 279.70M | 235.81M | 0.00 |
| Net Income Common Stockholders | |||||
| 54.61M | 175.05M | 117.33M | 29.22M | 237.26M | 39.22M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 112.91M | 63.97M | 145.54M | 23.53M | 29.33M | 39.10M |
| Total Assets | |||||
| 3.08B | 3.20B | 3.22B | 2.65B | 2.64B | 1.64B |
| Total Debt | |||||
| 0.00 | 0.00 | 1.60B | 1.30B | 1.27B | 709.32M |
| Net Debt | |||||
| -112.91M | -63.97M | 1.46B | 1.28B | 1.24B | 670.22M |
| Total Liabilities | |||||
| 1.63B | 1.71B | 1.70B | 1.40B | 1.32B | 725.83M |
| Stockholders Equity | |||||
| 1.45B | 1.49B | 1.52B | 1.25B | 1.31B | 914.88M |
| Cash Flow | Free Cash Flow | ||||
| 321.57M | 19.08M | 228.76M | 22.39M | -230.52M | -152.88M |
| Operating Cash Flow | |||||
| 321.57M | 19.08M | 228.76M | 22.39M | -230.52M | -152.88M |
| Investing Cash Flow | |||||
| -51.06M | 0.00 | 0.00 | -8.32M | -328.01M | -147.61M |
| Financing Cash Flow | |||||
| -167.40M | -86.77M | -110.41M | -26.82M | 224.19M | 176.33M |
Oaktree Specialty Lending Technical Analysis
Positive
15.63
Price Trends
15.33
Positive
15.15
Positive
15.48
Positive
Market Momentum
0.08
Negative
55.90
Neutral
48.88
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For OCSL, the sentiment is Positive. The current price of 15.63 is above the 20-day moving average (MA) of 15.50, above the 50-day MA of 15.33, and above the 200-day MA of 15.48, indicating a bullish trend. The MACD of 0.08 indicates Negative momentum. The RSI at 55.90 is Neutral, neither overbought nor oversold. The STOCH value of 48.88 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for OCSL.
Oaktree Specialty Lending Risk Analysis
Oaktree Specialty Lending disclosed 70 risk factors in its most recent earnings report. Oaktree Specialty Lending reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Oaktree Specialty Lending Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $14.83B | 8.92 | 12.40% | 8.82% | 19.95% | -10.57% | |
74 Outperform | $5.10B | 9.83 | 19.26% | 5.16% | 51.80% | 12.05% | |
72 Outperform | $1.44B | 22.36 | 3.96% | 14.68% | -28.04% | -69.52% | |
64 Neutral | $14.46B | 10.13 | 8.73% | 4.25% | 17.00% | -11.86% | |
63 Neutral | $1.88B | ― | 0.78% | 16.35% | -31.63% | -0.75% | |
61 Neutral | $1.28B | 23.40 | 3.69% | 14.08% | -37.41% | -55.52% | |
58 Neutral | $657.65M | ― | -8.57% | 17.59% | 8.24% | -207.60% |
* Financial Sector Average
Performance Comparison
OCSL
Oaktree Specialty Lending
15.63
-1.42
-8.33%
MAIN
Main Street Capital
58.65
16.02
37.58%
PSEC
Prospect Capital
4.24
-0.62
-12.76%
ARCC
Ares Capital
22.05
3.68
20.03%
TCPC
BlackRock TCP Capital
7.86
-0.82
-9.45%
GSBD
Goldman Sachs BDC
12.27
-1.24
-9.18%
Oaktree Specialty Lending Earnings Call Summary
Earnings Call Date: Feb 4, 2025 | % Change Since: 1.03% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strategic actions to strengthen the company's financial position, including equity purchase at a premium, amended fee structure, and positive market outlook. However, the call also noted challenges such as declines in adjusted NII and NAV, issues with non-accrual investments, and interest rate pressures.Highlights
Equity Purchase at Premium
Oaktree purchased $100 million of newly issued common stock from OCSL at a 10% premium to the stock price, resulting in a nearly 7% increase to NAV.
Amended Fee Structure
A permanent cap was instituted on the Part I incentive fee, waiving $6.2 million of fees this quarter, providing clarity and stability.
Dividend Policy Adjustment
A new base dividend of $0.40 per share, plus a supplemental dividend of $0.07 per share was announced, aiming for sustainable distributions.
Strong Portfolio Activity
Invested $198 million in new and existing companies, with 82% of the portfolio in first lien positions, and a healthy weighted average yield of 10.7%.
Positive Developments in Portfolio
Finthrive was successfully restructured and removed from non-accrual status, among other positive trends in portfolio companies.
Optimistic Market Outlook
Expectations for increased deal flow in 2025, with private equity firms holding over $2 trillion of dry powder, suggest a positive outlook for the sector.
Lowlights
Adjusted NII Decline
Adjusted net investment income was $0.54 per share, down from $0.55 per share in the prior quarter.
Net Asset Value Decline
Net asset value per share declined from $18.09 to $17.63.
Challenges with Non-Accrual Investments
Investments on non-accrual status were 3.9% of the portfolio at fair value, with additions like Dominion Diagnostics facing liquidity challenges.
Write-Downs on Underperforming Assets
Further write-downs were taken on several underperforming assets, concentrated in a handful of struggling investments.
Interest Rate and Spread Challenges
Elevated interest rates remain a challenge for many borrowers; spreads have tightened, adding competitive pressure.
Company Guidance
During Oaktree Specialty Lending Corporation's first fiscal quarter of 2025 conference call, several key metrics and strategic actions were discussed. Oaktree purchased $100 million of newly issued common stock from OCSL at $17.63 per share, equating to a 10% premium, which resulted in nearly a 7% increase in net asset value (NAV). The company also implemented a new fee structure, waiving $6.2 million in Part I incentive fees. The dividend policy was amended to include a base dividend of $0.40 per share and a supplemental dividend of $0.07 per share. The adjusted net investment income for the quarter was $45 million, or $0.54 per share. OCSL's portfolio had a fair value of $2.8 billion, with investments in 136 companies, and a weighted average yield of 10.7% on debt investments. Non-accrual investments represented 3.9% of the portfolio at fair value. The company remains focused on leveraging its platform for growth, with a strong pipeline to deploy additional equity and leverage in the coming quarters.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.