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Saratoga Investment Corp (SAR)
NYSE:SAR
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Saratoga Investment
(NYSE:SAR)
68Neutral
Positive Factors
Credit Quality
Credit quality is solid with only two loans on non-accrual, equal to 0.6% at fair value, reflecting management's cautious approach.
Dividend Sustainability
SAR's quarterly dividend of $0.74/share was over-covered by net investment income of $0.90/share, indicating strong dividend sustainability.
Management Outlook
Management maintained a positive outlook, as SAR still enjoys a wide net interest margin of 8.2%.
Total Return Potential
SAR shares are expected to provide a dividend yield of 11.9% and stock price appreciation, leading to an estimated 12-month total return of about 29%.
Negative Factors
Stock Valuation
SAR shares currently trade at 0.91x NAV, which is below the price target of $29 equating to 1.08x NAV, indicating potential undervaluation.
Saratoga Investment (SAR) vs. S&P 500 (SPY)
Market Cap
$329.39M
Dividend Yield13.79%
Average Volume (3M)124.07K
Price to Earnings (P/E)9.2
Beta (1Y)0.45
Revenue Growth-24.05%
EPS Growth28.25%
CountryUS
EmployeesN/A
SectorFinancial
Sector Strength79
IndustryAsset Management
Share Statistics
EPS (TTM)2.48
Shares Outstanding14,346,373
10 Day Avg. Volume123,004
30 Day Avg. Volume124,069
Financial Highlights & Ratios
PEG Ratio0.33
Price to Book (P/B)N/A
Price to Sales (P/S)2.44
Price to Cash Flow (P/CF)0.90
P/FCF Ratio0.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$25.25Price Target Upside12.77% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
Saratoga Investment Business Overview & Revenue Model
Company DescriptionSaratoga Investment Corp (SAR) is a business development company that provides customized financing solutions to middle-market companies in the United States. It operates primarily in the sectors of technology, business services, and healthcare. The company focuses on delivering debt and equity capital to support growth, acquisitions, and refinancing needs, facilitating the expansion and operational success of its portfolio companies.
How the Company Makes MoneySaratoga Investment Corp generates revenue primarily through interest income from the debt investments it makes in middle-market businesses. These investments typically include first and second lien loans, mezzanine debt, and, to a lesser extent, equity investments. The company also earns money from capital gains when it exits equity positions in successful portfolio companies. Additionally, Saratoga Investment benefits from management and incentive fees, which are tied to the performance of the assets under management, given its role as an investment adviser. This structure allows the company to capitalize on both steady interest income and potential upside from equity investments.
Saratoga Investment Financial Statement Overview
Summary
Saratoga Investment shows strong revenue growth and operational efficiency, as evidenced by high gross and EBIT margins. However, low net profit margins imply potential challenges with non-operational costs. The balance sheet suggests moderate leverage with a stable equity base. Cash flows have improved significantly, but historical volatility indicates potential liquidity risks. Overall, the company is on a positive trajectory with opportunities for improved profitability.Income Statement
The income statement shows a strong gross profit margin at 99.84% for the TTM, indicating efficient cost management relative to revenue. However, the net profit margin is relatively low at 0.07%, highlighting potential issues with higher non-operating expenses or taxes. Revenue growth is robust, with substantial increases over the periods, particularly between the latest TTM and previous periods. EBIT and EBITDA margins are positive, showing operational efficiency, but the low net income impacts profitability.65
Positive
Balance Sheet
The balance sheet indicates a healthy equity position, with a debt-to-equity ratio of 2.06, which is manageable but slightly on the higher side for asset management firms, suggesting moderate leverage. The return on equity is modest at 6.73%, reflecting average profitability on shareholder investments. The equity ratio of 30.73% is stable, indicating a solid equity foundation relative to total assets.70
Positive
Cash Flow
Cash flow analysis reveals a significant improvement in free cash flow, with a remarkable growth rate in the TTM. The operating cash flow to net income ratio is robust at 3733.47, highlighting strong cash generation relative to net income. However, historical negative operating cash flows and high capital expenditures could pose liquidity risks if not managed.60
Neutral
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 35.98B | 143.87M | 99.10M | 57.58M | 26.32M | 63.61M | Gross Profit |
| 35.92B | 143.72M | -99.07B | 30.98M | 9.78M | 39.22M | EBIT |
| 13.13B | 107.93M | 60.26M | 68.40M | 19.94M | 56.35M | EBITDA |
| 19.97M | 0.00 | -63.77B | 91.09M | 48.95M | 120.42M | Net Income Common Stockholders |
| 34.07M | 8.93M | 24.68M | 45.74M | 14.78M | 55.74M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 3.58M | 8.69M | 65.75B | 52.87M | 18.83M | 24.60M | Total Assets |
| 96.94M | 1.19B | 1.08B | 876.24M | 592.15M | 530.87M | Total Debt |
| 36.99M | 803.67M | 711.13M | 498.88M | 274.05M | 204.88M | Net Debt |
| 33.41M | 763.17M | 615.05M | 446.01M | 255.22M | 180.28M | Total Liabilities |
| 41.46M | 820.98M | 731.20M | 520.46M | 287.97M | 226.58M | Stockholders Equity |
| 55.48M | 370.22M | 346.96M | 355.78M | 304.19M | 304.29M |
| Cash Flow | Free Cash Flow | ||||
| 94.30B | -157.21M | -130.37M | -203.13M | -62.35M | -15.14M | Operating Cash Flow |
| 94.22B | -157.21M | -130.37M | -203.13M | -62.35M | -15.14M | Investing Cash Flow |
| 36.37B | 0.00 | 2.25B | -55.08B | -78.08B | -19.89B | Financing Cash Flow |
| -7.78B | 101.64M | 173.58M | 226.09M | 52.81M | -7.50M |
Saratoga Investment Technical Analysis
Negative
22.39
Price Trends
24.34
Negative
23.99
Negative
22.65
Negative
Market Momentum
0.25
Negative
64.41
Neutral
83.99
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SAR, the sentiment is Negative. The current price of 22.39 is below the 20-day moving average (MA) of 24.19, below the 50-day MA of 24.34, and below the 200-day MA of 22.65, indicating a bearish trend. The MACD of 0.25 indicates Negative momentum. The RSI at 64.41 is Neutral, neither overbought nor oversold. The STOCH value of 83.99 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SAR.
Saratoga Investment Risk Analysis
Saratoga Investment disclosed 83 risk factors in its most recent earnings report. Saratoga Investment 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
Saratoga Investment Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $14.28B | 8.55 | 12.40% | 10.15% | 19.95% | -10.57% | |
74 Outperform | $4.69B | 9.04 | 19.26% | 5.67% | 51.80% | 12.05% | |
69 Neutral | $1.24B | 19.23 | 3.96% | 15.84% | -28.04% | -69.52% | |
68 Neutral | $329.39M | 9.24 | 9.28% | 13.79% | -24.05% | 28.25% | |
64 Neutral | $13.46B | 9.44 | 9.34% | 4.72% | 16.14% | -8.80% | |
63 Neutral | $1.65B | ― | 0.78% | 17.34% | -31.63% | -0.75% | |
58 Neutral | $598.09M | ― | -8.57% | 18.07% | 8.24% | -207.60% |
* Financial Sector Average
Performance Comparison
SAR
Saratoga Investment
22.39
2.10
10.35%
MAIN
Main Street Capital
51.48
7.08
15.95%
PSEC
Prospect Capital
3.49
-1.29
-26.99%
ARCC
Ares Capital
19.84
1.10
5.87%
TCPC
BlackRock TCP Capital
6.70
-2.09
-23.78%
GSBD
Goldman Sachs BDC
10.20
-2.93
-22.32%
Saratoga Investment Earnings Call Summary
Earnings Call Date: Jan 8, 2025 | % Change Since: -5.85% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Neutral
While Saratoga Investment Corp. demonstrated strong portfolio quality and cash position, challenges related to decreased adjusted NII, markdowns, and high leverage levels were also evident. The company continues to over-earn dividends and successfully exit investments, but recent total returns were below the industry average.Highlights
Increase in Total NAV and Steady NAV Per Share
Total NAV increased this quarter to $374.9 million from $372.1 million last quarter, with NAV per share remaining steady at $26.95.
Strong Portfolio Quality and High First Lien Debt
86.8% of the portfolio is in first lien debt, with the overall core non-CLO portfolio performing 3% above cost.
Over-Earning of Dividends
Substantial over-earning of the dividend continues, supporting the current dividend level and increasing NAV.
Successful Investment Exits
Recognition of a $4.8 million realized gain from the Invita investment, supporting strong returns.
Strong Cash Position
Quarter-end cash position grew to $250 million, improving effective leverage from 160.1% to 183.2% net leverage.
Lowlights
Decrease in Adjusted NII
Adjusted NII decreased by 5.3% from last year and 31.7% from last quarter, affected by interest rate reductions and outsized repayments.
Significant Credit Markdowns
The core non-CLO portfolio was marked down slightly by $1.4 million, and the CLO and JV were marked down by $4 million.
High Leverage Levels
Saratoga maintains high leverage levels compared to other BDCs, raising concerns about potential refinancing risks.
Poor Recent Total Returns
Total returns for the last 12 months were 4%, underperforming the BDC index of 13%.
Company Guidance
During the Q3 2025 earnings call for Saratoga Investment Corp. (SAR), key guidance metrics were outlined by the executive team. The company reported an adjusted net investment income (NII) of $12.4 million, which was a decrease of 5.3% from the previous year and a notable 31.7% drop from the last quarter. The adjusted NII per share stood at $0.90, reflecting a decline from $1.01 the previous year and $1.33 last quarter. Despite these decreases, the company maintained an adjusted NII yield of 13.3%. The return on equity for the latest 12 months improved to 9.2%, surpassing the industry average of 8.5%. The net asset value (NAV) per share was reported at $26.95, slightly down from $27.42 last year. The company highlighted a total portfolio fair value of $960 million, with an effective leverage of 183.2% net leverage. Additionally, the dividend yield was stated at 12.2%, based on a stock price of $24.21. The call also noted the deployment of $85 million in new and follow-on investments, while repayments totaled $160 million, leading to a strong cash position of $250 million.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.