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1. Company Snapshot

1.a. Company Description

Saratoga Investment Corp.is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies.It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity.


The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications.It seeks to invest in the United States.The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million.


The firm prefer to take a majority stake.It invests through direct lending as well as participation in loan syndicates.The firm was formerly known as GSC Investment Corp.


Saratoga Investment Corp.is based in New York, New York with an additional office in Florham Park, New Jersey.

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1.b. Last Insights on SAR

Saratoga Investment Corp.'s recent performance was driven by strong Q3 earnings and revenue beat, with adjusted net investment income (NII) per share increasing 1.1% sequentially. The company's diverse portfolio, primarily in healthcare, has a low non-accrual rate, with 85.2% of investments in senior secured debt, ensuring stability. Additionally, the company announced a quarterly dividend of $0.74 per share and a special dividend of $0.35 per share, totaling $1.09 per share in distributions for the fiscal third quarter. The upgrade to a Zacks Rank #2 (Buy) by a leading research firm reflects growing optimism about the company's earnings prospects.

1.c. Company Highlights

2. Saratoga Investment Corp's Q2 2026 Earnings: A Review of Financial Performance and Investment Strategy

Saratoga Investment Corp reported adjusted NII of $0.58 per share for Q2 2026, below analyst estimates of $0.67. The company's total portfolio fair value was $995.3 million, with a net asset value of $410.5 million, up 10.3% from last year and 3.6% from last quarter. The adjusted NII was $9.1 million, down 50.1% from last year and 10.5% from last quarter. The company's return on equity was 9.1% for the last twelve months, above the industry average of 7.3%. The base dividend was $0.25 per share per month, representing a 12.3% yield.

Publication Date: Nov -19

📋 Highlights
  • NAV Growth and Dividend Yield:: Saratoga’s Q2 NAV per share rose 3.6% to $25.61, with a $0.25/month dividend yielding 12.3%.
  • Adjusted NII Decline:: Q2 adjusted NII fell 50.1% YoY to $9.1 million, driven by lower short-term interest rates and spreads.
  • Portfolio Expansion and Credit Quality:: $52.2M in new investments and 99.7% of credits in top ratings, with 84.3% in first-lien debt.
  • Capital Deployment and Leverage:: $407M in investment capacity, 186.5% net leverage, and 10.1% LTM ROE, exceeding the BDC industry average.
  • CLO Strategy and Pipeline Growth:: $26.3M invested in CLO BB/BBB securities, 5% current allocation, and 20/51 term sheets from new relationships.

Investment Strategy and Portfolio Composition

The company originated $52.2 million in new investments, including three follow-ons and new investments in multiple double B and triple B CLO debt securities. The portfolio is well-structured for future economic conditions and uncertainty, with 84.3% of investments in first lien debt and generally supported by strong enterprise values and balance sheets in industries that have historically performed well in stress situations. As Michael Joseph Grisius noted, the company is doubling down on business development efforts to increase its market presence in the lower end of the middle market.

Credit Quality and Risk Management

The company's credit quality remains strong, with 99.7% of credits rated in the highest category and only one investment remaining on nonaccrual status. The company's portfolio companies are healthy, with 84% in first lien debt and a fair value 2.1% above cost. The company has no direct energy or commodities exposure and a low nonaccrual rate of 0.2%.

Valuation and Dividend Yield

With a P/E Ratio of 10.51 and a Dividend Yield of 17.21%, the company's valuation multiples suggest that the market is pricing in a relatively high yield to compensate for potential risks. The company's ROE of 8.49% is respectable, but the Net Debt / EBITDA ratio of 10.6 may indicate a high level of leverage. The company's management team is working diligently to continue the positive long-term trend as they deploy significant levels of available capital into the pipeline.

Outlook and Growth Prospects

The company expects CLO debt tranches to be a more significant part of its investment strategy going forward, but the exact proportion of the portfolio is uncertain. Analysts estimate next year's revenue growth at -17.0%, which may indicate a challenging environment for the company. However, the company's robust pipeline and increasing deal flow may help to mitigate this impact.

3. NewsRoom

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Dividend Power Dogs: 12 Ideal Safer November Stars

Nov -16

Source: seekingalpha.com

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Saratoga Investment Corp. Announces Special Dividend of $0.25 Per Share Fulfilling Its Fiscal 2025 Distribution Requirements

Nov -12

Source: globenewswire.com

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Saratoga Investment Corp. Announces New $85 Million Credit Facility with Valley National Bank

Nov -06

Source: globenewswire.com

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HKSTP Manifesting 20 Latest BFSI Tech and Translation of R&D at Hong Kong FinTech Week x StartmeupHK Festival 2025

Nov -05

Source: feeds.newsfilecorp.com

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Panic At The BDC Disco: Why The Sector Remains A Strong Buy

Oct -23

Source: seekingalpha.com

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Dividend Power Dogs: 13 Ideal Safer October Stars

Oct -21

Source: seekingalpha.com

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BDC Weekly Review: Spectre Of Dividend Cuts Is Haunting BDCs

Oct -18

Source: seekingalpha.com

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New Strong Sell Stocks for October 10th

Oct -10

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.90%)

6. Segments

Investment and Related Activities

Expected Growth: 9.9%

Saratoga Investment Corp's 9.9% growth in Investment and Related Activities is driven by a combination of factors, including a strong pipeline of new investments, successful exits from existing portfolio companies, and a favorable interest rate environment. Additionally, the company's focus on middle-market lending and its ability to provide flexible financing solutions have contributed to its growth.

7. Detailed Products

Middle Market Loans

Saratoga Investment Corp. provides middle market loans to companies with $10 million to $250 million in revenue, offering flexible and customized financing solutions.

Mezzanine Debt

Saratoga Investment Corp. offers mezzanine debt financing to companies seeking capital for growth, acquisitions, or recapitalizations, providing a flexible and patient source of capital.

Equity Co-Investments

Saratoga Investment Corp. makes equity co-investments alongside private equity sponsors, providing additional capital to support portfolio companies' growth initiatives.

SBIC Debentures

Saratoga Investment Corp. issues SBIC debentures, providing a source of long-term, fixed-rate capital to support its investment activities.

8. Saratoga Investment Corp.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Saratoga Investment Corp. operates in a niche market, providing financing solutions to middle-market companies. While there are some substitutes available, such as traditional banks and other financing institutions, Saratoga's specialized services and expertise in the middle-market segment reduce the threat of substitutes.

Bargaining Power Of Customers

Saratoga Investment Corp.'s customers are typically middle-market companies that rely on the company's financing solutions to support their growth. These customers often have limited bargaining power, as they require Saratoga's specialized services and expertise.

Bargaining Power Of Suppliers

Saratoga Investment Corp. is not heavily reliant on suppliers, as its business model is focused on providing financing solutions to customers. The company's suppliers are primarily providers of administrative and operational services, which are readily available and do not possess significant bargaining power.

Threat Of New Entrants

The threat of new entrants in the middle-market financing industry is relatively low, as it requires significant expertise, resources, and regulatory compliance. Saratoga Investment Corp.'s established presence and reputation in the market also create barriers to entry for new entrants.

Intensity Of Rivalry

The middle-market financing industry is moderately competitive, with several established players competing for market share. However, Saratoga Investment Corp.'s specialized services and expertise in the middle-market segment help to differentiate it from competitors and reduce the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 99.93%
Debt Cost 6.76%
Equity Weight 0.07%
Equity Cost 10.44%
WACC 6.76%
Leverage 151837.58%

11. Quality Control: Saratoga Investment Corp. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Saratoga Investment

A-Score: 7.0/10

Value: 6.0

Growth: 5.1

Quality: 6.2

Yield: 10.0

Momentum: 5.0

Volatility: 9.7

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Value: 8.2

Growth: 3.7

Quality: 6.1

Yield: 9.0

Momentum: 5.0

Volatility: 10.0

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TriplePoint Venture Growth BDC

A-Score: 6.7/10

Value: 7.8

Growth: 4.0

Quality: 8.1

Yield: 10.0

Momentum: 3.0

Volatility: 7.0

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WisdomTree

A-Score: 5.9/10

Value: 3.5

Growth: 6.3

Quality: 7.4

Yield: 3.0

Momentum: 8.0

Volatility: 7.3

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BlackRock TCP Capital

A-Score: 5.9/10

Value: 8.4

Growth: 3.3

Quality: 3.8

Yield: 10.0

Momentum: 2.0

Volatility: 8.0

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PhenixFIN

A-Score: 5.7/10

Value: 7.3

Growth: 4.2

Quality: 7.0

Yield: 3.0

Momentum: 4.5

Volatility: 8.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

22.71$

Current Price

22.71$

Potential

-0.00%

Expected Cash-Flows