Capital Southwest Corporation Common Stock (CSWC)

FairStock Score: 84/100 — HIGH CONVICTION

Key Financials

Strengths

• Generates $87 million in annual free cash flow (6.2% yield on market cap)
• Solid return on equity of 11.3% above cost of capital
• Healthy net profit margin of 14.5% showing consistent profitability
• Revenue growth of 64.9% demonstrates strong top-line momentum
• Attractive 10.8% dividend yield providing steady income returns

Concerns

• Altman Z-Score of 0.7 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Capital Southwest Corporation Common Stock is a micro-cap financial services company valued at $1.4 billion. The business generates $227 million in annual revenue with a 14.5% net margin and $87 million in free cash flow. From a quality standpoint, Capital shows distressed Altman Z-Score of 0.7 warrants caution and adequate 11% ROE. On valuation, the stock is attractively valued at 13.0x earnings, with a modest 10% margin of safety vs Graham Number. Growth dynamics show revenue growing at 64.9% and profit growth of 102.2%. The 10.8% dividend yield adds an income component for patient holders. Our composite FairStock Score of 84/100 reflects strong fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Capital's 65% revenue growth trajectory could accelerate as it captures additional market share in the financial services sector. With $87 million in annual free cash flow (6.2% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Macro headwinds or sector-specific disruption could pressure margins, particularly if competitive intensity increases in the financial services space. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer