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Sixth Street Specialty Lending (TSLX)
NYSE:TSLX
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Sixth Street Specialty Lending
(NYSE:TSLX)73Outperform
Positive Factors
Dividend Coverage
Dividend coverage remains a standout, with a base dividend coverage ratio of 132% in the quarter and a total dividend coverage ratio of 115%.
Earnings Performance
Sixth Street Specialty Lending delivers another impressive quarter, generating an impressive 14.2% adjusted NII ROE despite some macro headwinds.
Negative Factors
Non-Accrual Investments
Non-accruals were moderately higher, totaling 3.8% of the portfolio, compared to 2.1% last quarter.
Sixth Street Specialty Lending (TSLX) vs. S&P 500 (SPY)
Market Cap
$2.12B
Dividend Yield8.13%
Average Volume (3M)440.61K
Price to Earnings (P/E)11.2
Beta (1Y)0.59
Revenue Growth8.07%
EPS Growth-22.25%
CountryUS
EmployeesN/A
SectorFinancial
Sector Strength93
IndustryAsset Management Services
Share Statistics
EPS (TTM)2.03
Shares Outstanding93,661,440
10 Day Avg. Volume487,179
30 Day Avg. Volume440,610
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)5.52
Price to Cash Flow (P/CF)-17.20
P/FCF Ratio38.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$23.71Price Target Upside5.19% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering9
Sixth Street Specialty Lending Business Overview & Revenue Model
Company DescriptionSixth Street Specialty Lending, Inc. (TSLX) is a specialty finance company focused on providing flexible, customized financing solutions to middle-market companies across various industries. As a business development company (BDC), TSLX primarily engages in originating, acquiring, and managing a portfolio of senior secured loans, mezzanine debt, and equity investments. The company aims to deliver attractive risk-adjusted returns to its investors by leveraging its expertise in credit analysis and industry relationships to identify and invest in high-quality opportunities.
How the Company Makes MoneySixth 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.85
Very Positive
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.70
Positive
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.60
Neutral
| 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
Neutral
22.54
Price Trends
22.09
Positive
21.18
Positive
20.62
Positive
Market Momentum
0.17
Positive
49.12
Neutral
19.65
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSLX, the sentiment is Neutral. The current price of 22.54 is below the 20-day moving average (MA) of 22.82, above the 50-day MA of 22.09, and above the 200-day MA of 20.62, indicating a neutral trend. The MACD of 0.17 indicates Positive momentum. The RSI at 49.12 is Neutral, neither overbought nor oversold. The STOCH value of 19.65 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSLX.
Sixth Street Specialty Lending Risk Analysis
Sixth Street Specialty Lending disclosed 64 risk factors in its most recent earnings report. Sixth Street 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
Sixth Street 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 |
|---|---|---|---|---|---|---|---|
77 Outperform | $5.11B | 10.02 | 19.26% | 5.06% | 51.80% | 12.05% | |
76 Outperform | $15.07B | 9.43 | 12.40% | 8.34% | 19.95% | -10.57% | |
73 Outperform | $2.12B | 11.16 | 12.02% | 8.13% | 8.07% | -22.25% | |
70 Outperform | $494.73M | 7.04 | 14.74% | 7.11% | -8.68% | -3.76% | |
66 Neutral | $6.35B | 10.95 | 8.69% | 12.24% | -16.13% | -15.88% | |
65 Neutral | $1.93B | ― | 0.78% | 15.75% | -31.63% | -0.75% | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% |
* Financial Sector Average
Performance Comparison
TSLX
Sixth Street Specialty Lending
22.54
3.11
16.01%
GAIN
Gladstone Investment
13.43
0.89
7.10%
MAIN
Main Street Capital
57.65
15.06
35.36%
PSEC
Prospect Capital
4.35
-0.53
-10.86%
ARCC
Ares Capital
22.45
3.54
18.72%
FSK
FS KKR Capital
22.67
6.01
36.07%
Sixth Street Specialty Lending Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: 0.63% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong performance in Q4 and 2024 overall, highlighted by record activity-based fees and net asset value growth. However, challenges such as credit deterioration in a couple of portfolio companies and a decline in new investment spreads were noted. While there are some lowlights, the highlights of strong financial performance and growth outweigh them.Highlights
Strong Fourth Quarter Results
Adjusted net investment income was $0.61 per share, with an annualized operating return on equity of 14.2%. Adjusted net income was $0.54 per share, with an annualized return on equity of 12.5%.
Record Activity-Based Fees
In Q4, the company earned $0.15 per share of activity-based fees, the highest amount in seven quarters.
Net Asset Value Growth
Net asset value per share increased from $17.12 as of September 30 to $17.16 as of December 31, 2024.
Increased Investment Activity
Q4 was the busiest quarter in three years with $479 million in total commitments and $324 million in total fundings.
Lowlights
Idiosyncratic Credit Deterioration
Two portfolio companies, Astrac Acquisition Corp and Lithium Technologies, were added to non-accrual status, impacting net investment income by $0.07 per share in 2024.
Decline in New Investment Spreads
Weighted average spread on first lien performing assets decreased from 8.3% to 8% between Q4 2023 and Q3 2024, impacting net investment income by $0.07 per share.
Company Guidance
During the call, Sixth Street Specialty Lending, Inc. provided guidance for 2025, expecting a return on equity on net investment income ranging from 11.5% to 12.5%. This corresponds to a full-year adjusted net investment income per share between $1.97 and $2.14, based on their year-end book value per share of $17.09. The company highlighted their strong performance in 2024, with a full-year adjusted net investment income of $2.33 per share, representing an operating return on equity of 13.8%. They also reported an increase in net asset value per share from $17.04 to $17.16 over the year. Key contributors to their 2024 results included higher base interest rates and significant activity-based fees, while credit headwinds and tighter new investment spreads were noted challenges. Looking ahead, they emphasized the importance of portfolio spreads in driving future returns and maintained a conservative outlook, assuming spreads remain consistent and portfolio turnover decreases.Sixth Street Specialty Lending Corporate Events
DividendsFinancial Disclosures
Sixth Street Specialty Lending Reports 2024 Financial Results
Positive
Feb 13, 2025
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.
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.