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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 Fiscal Third Quarter 2026 Highlights: Steady NAV Growth and Strong Underwriting

Saratoga Investment Corp reported a net interest income (NII) of $0.61 per share, beating analyst estimates of $0.59 per share. The company's NII increased by $0.03 per share from the previous quarter, reflecting a 13.5% return on equity. The company's net originations were $17.2 million, including 3 new portfolio companies. The adjusted NII was $9.8 million, down 21.3% from last year but up 7.8% from last quarter.

Publication Date: Jan -09

📋 Highlights
  • NAV Growth: NAV increased 10.2% YoY to $413 million and 0.7% QoQ to $410.5 million.
  • Net Interest Income: NII rose $0.03/share to $0.61/share (13.5% ROE), with adjusted NII up 7.8% QoQ to $9.8 million.
  • Dividend Yield: $0.75/share annualized dividend represents 12.9% yield at $23.19 stock price as of Jan 6, 2026.
  • Portfolio Health: Non-accrual rate at 0.4% of cost (8x below industry average of 3.2%), 84% in first lien debt, and fair value 2.1% above cost.

Financial Performance and Portfolio Health

The company's net asset value (NAV) was $413 million, up 10.2% from $375 million last year and up 0.7% from $410.5 million last quarter. The non-accrual rate of 0.4% of cost is 8x lower than the industry average of 3.2%, reflecting strong underwriting in growing portfolio companies. The weighted average interest rate on the core BDC portfolio was 10.6%, down from 11.8% last year and 11.3% last quarter.

Dividend and Valuation

A monthly base dividend of $0.25 per share or $0.75 per share in aggregate for the fourth quarter of fiscal 2026 was announced, representing a 12.9% yield based on the stock price of $23.19 as of January 6, 2026. The dividend yield is attractive, and with a P/E Ratio of 15.04 and a Dividend Yield of 15.21%, the company's valuation appears reasonable. The company's available liquidity allows it to grow assets by an additional 39% without external financing.

Outlook and Opportunities

The company's executives expressed optimism about the future, citing a strong pipeline with $72.1 million in originations in the quarter and $89.3 million in new originations subsequent to quarter end. The team remains focused on deploying capital into strong business models with sustainable enterprise values. As the management team has invested $2.4 billion in 125 portfolio companies with only 3 realized economic losses, their track record is impressive.

Market Conditions and Competition

The company's executives acknowledged the impact of AI on lending and are cautious about investing in industries vulnerable to AI. They also noted increased competition but are well-equipped to capitalize on opportunities. With interest rates decreasing, spreads may widen, but the company's expertise in SaaS lending and growing relationships outside of this space position it for success.

3. NewsRoom

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Financial Comparison: Saratoga Investment (NYSE:SAR) & Nuveen Churchill Direct Lending (NYSE:NCDL)

Feb -13

Source: defenseworld.net

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Where the Risk Is in Software Lending

Feb -10

Source: barrons.com

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Saratoga Investment Corp. Prices Public Offering of $100 Million 7.50% Notes Due 2031

Jan -30

Source: globenewswire.com

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Saratoga Investment Corp. Announces Offering of Notes and BBB+ Investment Grade Rating from Egan-Jones Ratings Company

Jan -29

Source: globenewswire.com

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Saratoga Investment (NYSE:SAR) & Main Street Capital (NYSE:MAIN) Head to Head Survey

Jan -22

Source: defenseworld.net

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DPC Dash-Domino's Pizza China Successfully Completes 2025 Full-Year Store Expansion with Outstanding Performance and Innovation

Jan -09

Source: prnewswire.com

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Saratoga Investment Corp (SAR) Q3 2026 Earnings Call Transcript

Jan -08

Source: seekingalpha.com

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Saratoga Investment Corp. Announces Fiscal Third Quarter 2026 Financial Results

Jan -07

Source: globenewswire.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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WisdomTree

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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

23.29$

Current Price

23.29$

Potential

-0.00%

Expected Cash-Flows