Company Overview
Saratoga Investment Corp. operates as a business development company focused on executing leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions specifically targeting the lower end of middle market companies. The company functions within the Financial Services sector, specifically in the Asset Management industry, which denotes its role in managing capital and providing financial solutions to corporate entities rather than engaging in direct product sales. Saratoga Investment Corp. maintains a market capitalization of $339.41M and reported annual revenue of $125.88M over the trailing twelve months, while the specific employee count is not publicly disclosed in available records. These valuation and revenue figures indicate that the company is a mid-sized financial entity with a substantial revenue base relative to its market cap, suggesting a business model where earnings and cash flows are critical components of its valuation rather than traditional sales volume metrics.
Financial Health
The company reported revenue of $125.88M for the trailing twelve months, generated net income of $38.54M, and does not publish EBITDA figures in its current reporting cycle. The significant gap between the total revenue of $125.88M and the net income of $38.54M reveals a high-cost structure typical of financial intermediaries, where operating expenses and fees consume a large portion of top-line revenue before reaching the bottom line. Saratoga Investment Corp. generated free cash flow of $11.39M, which indicates a level of financial flexibility that allows the company to service its obligations and potentially fund new transactions, though the amount is modest relative to total revenue. The company exhibits a gross margin of 100.0%, reflecting the nature of its business where costs of goods sold are negligible compared to revenue, an operating margin of 67.9% showing efficient control over administrative and operational costs, and a profit margin of 30.6% demonstrating strong overall profitability. In terms of liquidity and leverage, the company holds cash of $52.30M against total debt of $764.68M, resulting in a debt-to-equity ratio of 185.06, which characterizes the balance sheet as highly leveraged and consistent with the business development company model. The current ratio stands at 2.11, indicating that the company possesses more than double the current assets necessary to cover its short-term liabilities, suggesting robust short-term liquidity despite the heavy debt load. Return on equity is calculated at 9.8%, while return on assets is 4.6%, metrics that reveal the effectiveness of management in generating returns on the capital deployed and the assets held, respectively, within a highly leveraged environment.
Valuation Assessment
Saratoga Investment Corp. trades with a trailing twelve months P/E ratio of 8.64 and a forward P/E of 8.94, implying that the market expects earnings growth to be moderate or slightly slower than the current run rate, as the forward multiple is higher than the trailing multiple. The price-to-book ratio is 0.82, indicating that the market values the company at a discount to its book value, which is a common valuation characteristic for financial institutions and business development companies due to the risks associated with their high leverage. The price-to-sales ratio stands at 2.70, while the EV/EBITDA metric is not available, suggesting that investors are relying on equity-based metrics to gauge value rather than enterprise value multiples. The stock has traded between a 52-week high of $25.64 and a 52-week low of $20.78, meaning the current price sits within a range that reflects recent volatility but remains below the year's peak performance. The beta value of 0.59 suggests that the stock price is significantly less volatile than the broader market, moving at a slower pace than the general market index.
Growth & Income
Revenue growth for the trailing twelve months stands at -11.8%, while earnings growth is positive at 16.3%, indicating that earnings are growing significantly faster than revenue, which often points to cost rationalization, efficiency gains, or a shift in the product mix toward higher-margin services. The company pays a dividend with a yield of 14.3%, supported by a payout ratio of 123.6%, which implies that the dividend is currently funded by a combination of earnings and potentially other capital sources or prior reserves, raising questions regarding long-term sustainability without a reduction in the payout or an increase in earnings. Given that the payout ratio exceeds 100%, the company is not strictly reinvesting all earnings into growth but rather returning a substantial portion of its profits to shareholders, even if that return is not fully covered by current net income. The overall growth and income profile presents a mixed picture of declining top-line revenue contrasted with strong earnings expansion and a very high dividend yield that may require close monitoring for future stability.