Sixth Street Specialty Lending (TSLX) AI Stock Analysis

• Market Cap: $2.18B
• Dividend Yield: 9.05%
• Average Volume (3M): 368.55K
• Price to Earnings (P/E): 11.5
• Beta (1Y): 0.55
• Revenue Growth: -6.29%
• EPS Growth: -15.46%
• Country: US
• Employees: N/A
• Sector: Financial
• Sector Strength: 70
• Industry: Asset Management
• EPS (TTM): 0.56
• Shares Outstanding: 94,240,350
• 10 Day Avg. Volume: 466,147
• 30 Day Avg. Volume: 368,549
• PEG Ratio: -0.47
• Price to Book (P/B): 1.22
• Price to Sales (P/S): 4.31
• P/FCF Ratio: -43.09
• Enterprise Value/Market Cap: 1.80
• Enterprise Value/Revenue: 8.58
• Enterprise Value/Gross Profit: 15.42
• Enterprise Value/Ebitda: 12.61
• 1Y Price Target: $24.00
• Price Target Upside: 4.90% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 9

• Rating: 74 Outperform
• Price Target: $26.00 ▲(13.64% Upside)

Sixth Street Specialty Lending's strong financial performance and attractive valuation are the most significant factors contributing to its score. The earnings call further supports the company's robust position with high dividend coverage and effective capital allocation. Technical analysis presents mixed signals, but the overall outlook remains positive.

Positive Factors

Effective Capital Allocation

Effective capital allocation has led to superior economic returns, enhancing long-term shareholder value and demonstrating management's strategic acumen.

Strong Dividend Coverage

Strong dividend coverage ensures reliable income for investors and reflects the company's ability to generate consistent cash flows, supporting long-term financial stability.

Positive NAV Growth

Positive NAV growth indicates effective management and asset quality, enhancing investor confidence and supporting the company's market position.

Negative Factors

Decline in Portfolio Yield

A decline in portfolio yield reflects competitive pressures and could impact future revenue generation, challenging the company's ability to maintain high returns.

Revenue Contraction

Revenue contraction poses a risk to long-term growth, potentially limiting the company's ability to expand its market presence and invest in new opportunities.

Elevated Repayment Activity

Elevated repayment activity may reduce income if the company cannot efficiently reinvest in high-yielding assets, impacting future profitability and cash flows.

Sixth Street Specialty Lending Business Overview & Revenue Model

Company Description

Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance and lending to middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.

How the Company Makes Money

Sixth Street Specialty Lending generates revenue primarily through interest income on its debt investments, which include first-lien and second-lien loans, as well as mezzanine debt. These loans typically come with higher interest rates compared to traditional bank financing, allowing TSLX to capture substantial yield. Additionally, the company may earn fees for structuring and arranging loans, and it can also generate income through equity investments in some of its portfolio companies. The firm's revenue model is supported by its strategic partnerships with private equity firms and other financial institutions, which help in sourcing quality investment opportunities and enhancing its deal flow.

Sixth Street Specialty Lending Financial Statement Overview

Summary

Sixth Street Specialty Lending exhibits strong profitability with high net profit and EBIT margins. The balance sheet is stable, with a solid equity base and moderate leverage. However, revenue contraction and historical cash flow volatility pose risks.

Income Statement

Sixth Street Specialty Lending shows strong performance in its income statement, with a robust net profit margin of 50.13% and a high EBIT margin of 89.11% for TTM (Trailing-Twelve-Months). However, the revenue growth rate is negative, indicating a decrease in revenue compared to the previous year. The company maintains a healthy EBITDA margin of 81.07%.

Balance Sheet

The company has a solid equity base with an equity ratio of 47.35% and a relatively low debt-to-equity ratio of 1.07, indicating a moderate level of leverage. Return on Equity is impressive at 12.97%, signifying effective use of equity to generate profits. The balance sheet reflects a stable financial position, although there is a slight increase in total liabilities over the periods.

Cash Flow

Cash flow metrics reveal mixed results. The company has a positive free cash flow for TTM, demonstrating operational efficiency, but the free cash flow growth rate is unavailable due to previous negative cash flows. The operating cash flow to net income ratio is 0.82, implying a healthy conversion of income into cash, yet historical cash flow volatility poses a risk.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	457.60M	455.10M	421.10M	323.72M	319.50M	270.04M
Gross Profit	254.59M	364.62M	328.92M	259.71M	236.04M	270.04M
EBITDA	311.15M	193.12M	0.00	26.44M	137.06M	227.75M
Net Income	187.60M	186.57M	222.02M	108.05M	211.78M	178.11M
Balance Sheet
Total Assets	3.42B	3.58B	3.34B	2.84B	2.55B	2.34B
Cash, Cash Equivalents and Short-Term Investments	39.17M	4.97M	1.22M	10.21M	1.57M	2.46M
Total Debt	1.73B	1.90B	1.78B	1.44B	1.19B	1.11B
Total Liabilities	1.80B	1.97B	1.85B	1.50B	1.28B	1.18B
Stockholders Equity	1.62B	1.61B	1.50B	1.34B	1.28B	1.16B
Cash Flow
Free Cash Flow	171.74M	187.25M	191.97M	71.83M	112.62M	135.97M
Operating Cash Flow	171.74M	187.25M	191.97M	71.83M	112.62M	135.97M
Investing Cash Flow	66.16M	-232.74M	-428.76M	-296.37M	-110.17M	9.10M
Financing Cash Flow	-233.38M	47.62M	236.34M	234.21M	241.00K	-145.94M

Sixth Street Specialty Lending Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 22.88
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSLX, the sentiment is Negative. The current price of 22.88 is below the 20-day moving average (MA) of 23.70, below the 50-day MA of 23.68, and above the 200-day MA of 21.71, indicating a neutral trend. The MACD of -0.20 indicates Positive momentum. The RSI at 38.18 is Neutral, neither overbought nor oversold. The STOCH value of 9.07 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSLX.

Sixth Street Specialty Lending Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TRIN	80 Outperform	1.11B	7.08	14.05%	12.66%	31.43%	30.85%
TSLX	74 Outperform	$2.18B	11.55	11.66%	9.05%	-6.29%	-15.46%
CSWC	71 Outperform	1.25B	14.10	9.11%	10.08%	12.82%	-5.37%
GSBD	71 Outperform	1.25B	8.82	―	15.97%	-55.16%	47.09%
NMFC	65 Neutral	1.03B	12.79	―	13.18%	39.05%	-32.62%
AAMI	61 Neutral	1.71B	19.88	425.00%	0.08%	21.14%	42.83%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%