Sixth Street Specialty Lending (TSLX) AI Stock Analysis

• Market Cap: $1.91B
• Dividend Yield: 9.03%
• Average Volume (3M): 517.56K
• Price to Earnings (P/E): 10.1
• Beta (1Y): 0.61
• Revenue Growth: 8.07%
• EPS Growth: -22.25%
• Country: US
• Employees: N/A
• Sector: Financial
• Sector Strength: 79
• Industry: Asset Management
• EPS (TTM): 2.03
• Shares Outstanding: 93,661,440
• 10 Day Avg. Volume: 650,743
• 30 Day Avg. Volume: 517,557
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 14.69
• Price to Cash Flow (P/CF): -17.10
• P/FCF Ratio: 37.90
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $23.71
• Price Target Upside: 19.81% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 9

Sixth Street Specialty Lending is performing well with strong profitability and revenue growth, supported by a solid balance sheet. The stock demonstrates positive momentum despite being overbought. Valuation metrics are attractive, and the earnings call confirms robust performance and growth. However, cash flow management challenges and potential credit risks require attention.

Positive Factors

Financial Performance

Sixth Street Specialty Lending delivers another impressive quarter, generating an impressive 14.2% adjusted NII ROE despite some macro headwinds.

Investment Strategy

TSLX is likely to recognize a gain from its investment in Arrowhead Pharmaceuticals, as the company announced a licensing and collaboration agreement that will likely result in a positive outcome.

Negative Factors

Credit Quality

Non-accruals were moderately higher, totaling 3.8% of the portfolio, compared to 2.1% last quarter.

Investment Portfolio

Adjusted EPS totaled $0.41, which was negatively impacted by some unrealized losses primarily tied to one investment moving to non-accrual status.

Sixth Street Specialty Lending Business Overview & Revenue Model

Company Description

Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance and lending to middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.

How the Company Makes Money

Sixth Street Specialty Lending makes money primarily through the interest and fees collected on its portfolio of debt investments, including senior secured loans and mezzanine debt. These investments generate income in the form of interest payments from the borrowing companies. Additionally, TSLX may earn income through origination and structuring fees charged at the initiation of a new loan. The company also seeks to enhance its returns through equity investments, which can provide capital appreciation and potential dividend income. TSLX's earnings are further supported by its strategic partnerships and its affiliation with Sixth Street Partners, a global investment firm, which provides access to extensive industry insights and deal-sourcing capabilities. The company's revenue model is driven by its ability to effectively manage credit risk, maintain a diversified investment portfolio, and optimize its capital structure to support consistent income generation.

Sixth Street Specialty Lending Financial Statement Overview

Summary

Sixth Street Specialty Lending shows strong profitability and revenue growth with a solid balance sheet. However, challenges in cash flow management with negative free cash flows and operating cash flow issues require attention.

Income Statement

The company has shown strong revenue growth over the years, with a substantial increase in total revenue from 2022 to 2023. The gross profit margin is consistent, indicating efficient cost management. Net profit margin and EBIT margin are robust, reflecting healthy profitability. However, the absence of EBITDA data limits the analysis of operational efficiency beyond EBIT.

Balance Sheet

The balance sheet reveals a stable equity position with a high equity ratio, enhancing financial stability. The debt-to-equity ratio is low, indicating low leverage and reduced financial risk. Return on equity is impressive, showcasing effective utilization of shareholders' funds. The primary concern is the high level of total liabilities, which could pose a risk if not managed effectively.

Cash Flow

The cash flow statement shows challenges in generating positive free cash flow, with negative figures in recent years indicating potential liquidity issues. The operating cash flow to net income ratio is not calculable due to negative operating cash flows, highlighting operational cash management concerns. The company must focus on improving cash flow from operations to support long-term growth.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
473.08B	438.09M	136.49M	223.96M	198.35M
	Gross Profit
473.08B	328.92M	72.48M	140.50M	133.34M
	EBIT
460.02B	332.50M	168.95M	212.16M	183.87M
	EBITDA
0.00	0.00	26.44M	137.06M	0.00
	Net Income Common Stockholders
186.57M	222.02M	108.05M	211.78M	178.11M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
27.33B	25.20M	2.74B	1.57M	2.46M
	Total Assets
3.58T	3.34B	2.84B	2.55B	2.34B
	Total Debt
0.00	1.78B	1.44B	1.19B	1.11B
	Net Debt
-27.33B	-1.22M	1.43B	1.18B	1.11B
	Total Liabilities
1.97B	1.85B	1.50B	1.28B	1.18B
	Stockholders Equity
1.61T	1.50B	1.34B	1.28B	1.16B
Cash Flow		Free Cash Flow
-45.49M	-236.79M	-224.53M	2.45M	145.07M
	Operating Cash Flow
-45.49M	-236.79M	-224.53M	2.45M	145.07M
	Investing Cash Flow
0.00	0.00	-995.62M	-1.20T	-1.04T
	Financing Cash Flow
47.62M	236.34M	234.21M	241.00K	-145.94M

Sixth Street Specialty Lending Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 19.79
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSLX, the sentiment is Negative. The current price of 19.79 is below the 20-day moving average (MA) of 21.68, below the 50-day MA of 21.95, and below the 200-day MA of 20.41, indicating a bearish trend. The MACD of 0.12 indicates Negative momentum. The RSI at 54.86 is Neutral, neither overbought nor oversold. The STOCH value of 55.07 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSLX.

Sixth Street Specialty Lending Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TSLX	73 Outperform	$1.91B	10.05	12.02%	9.03%	8.07%	-22.25%
CSWC	71 Outperform	$997.98M	14.22	8.57%	11.71%	4.85%	-37.38%
GSBD	69 Neutral	$1.24B	19.23	3.96%	15.84%	-28.04%	-69.52%
HTGC	67 Neutral	$3.03B	10.86	13.71%	9.15%	-1.49%	-29.48%
NMFC	66 Neutral	$1.06B	9.60	8.49%	12.97%	-3.55%	-20.43%
BCSF	66 Neutral	$964.70M	8.07	10.49%	11.25%	12.24%	-3.21%
Sector *	64 Neutral	$13.46B	9.44	9.34%	4.72%	16.14%	-8.80%

Sixth Street Specialty Lending Corporate Events

Sixth Street Specialty Lending Reports 2024 Financial Results

On February 13, 2025, Sixth Street Specialty Lending announced its financial results for the full year and fourth quarter of 2024, along with the declaration of a first quarter 2025 base dividend of $0.46 per share and a fourth quarter 2024 supplemental dividend of $0.07 per share. The company reported an increase in net investment income and net income for the year and quarter, reflecting a higher interest rate environment and increased fee income. The company’s portfolio showed growth with new investment commitments and a stable NAV per share, enhancing its financial position and investor returns.