Value
9.6/10data confidence 50%| Component | Sub-score |
|---|---|
| P/S | 9.2 |
| Fwd P/E | 9.8 |
| PEG | 10.0 |
- ▸Forward P/E: 6.4x
- ▸PEG: 0.03
- ▸Attractively valued
PSEC · Why this verdict
Why Prospect Capital (PSEC) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score5.8/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue declined -12% year over year, indicating that the loan portfolio or fee income streams are contracting, which is a negative signal for a lending-focused business development company that depends on portfolio growth for income generation. Growth breakdown | Revenue growth returns to above 0% in the next annual reporting period, signaling that portfolio contraction has stabilized. | →Stable |
| CounterRevenue declines in BDCs can reflect deliberate portfolio quality improvement (rotating out of riskier assets into safer loans at lower yields) rather than underlying deterioration. | ||
Prospect Capital trades at 6.6x forward earnings with a PEG ratio of 0.03 and has beaten earnings estimates in all 4 of the last 4 quarters with an average positive surprise of 55.9%, suggesting the business is generating more cash than the market is pricing in. Valuation breakdown | The earnings beat streak extends to 6 consecutive quarters and free cash flow yield (currently 17.6%) remains above 10% over the next 12 months. | →Stable |
| CounterExtreme low multiples in business development companies often reflect serious credit quality concerns in the loan portfolio that are not yet visible in reported earnings. | ||
The 200-day moving average is declining at -1.4% per month, the stock is below this long-term trend, and this is a confirmed downtrend — meaning price momentum is working against fundamental value recognition at the current time. Momentum breakdown | The 200-day moving average slope turns positive (above 0%) within 6 months, indicating that the sustained downtrend is reversing. | →Stable |
| CounterBusiness development companies can trade at discounts to NAV and in downtrends for extended periods while still delivering positive total returns through dividends. | ||
The put-to-call ratio stands at 12.5, an unusually high reading that indicates extreme positioning toward put options relative to calls, which reflects either significant hedging demand or directional bearish bets by options market participants. Key risks | The put-to-call ratio falls below 3.0 as hedging demand subsides and market sentiment toward the stock normalizes. | →Stable |
| CounterExtremely high put-to-call ratios can be contrarian indicators, as peak pessimism often precedes a sentiment reversal, especially when earnings are beating expectations. | ||
Revenue declined -12% year over year, indicating that the loan portfolio or fee income streams are contracting, which is a negative signal for a lending-focused business development company that depends on portfolio growth for income generation.
→StableGrowth breakdown
- Expectation
- Revenue growth returns to above 0% in the next annual reporting period, signaling that portfolio contraction has stabilized.
CounterRevenue declines in BDCs can reflect deliberate portfolio quality improvement (rotating out of riskier assets into safer loans at lower yields) rather than underlying deterioration.
Prospect Capital trades at 6.6x forward earnings with a PEG ratio of 0.03 and has beaten earnings estimates in all 4 of the last 4 quarters with an average positive surprise of 55.9%, suggesting the business is generating more cash than the market is pricing in.
→StableValuation breakdown
- Expectation
- The earnings beat streak extends to 6 consecutive quarters and free cash flow yield (currently 17.6%) remains above 10% over the next 12 months.
CounterExtreme low multiples in business development companies often reflect serious credit quality concerns in the loan portfolio that are not yet visible in reported earnings.
The 200-day moving average is declining at -1.4% per month, the stock is below this long-term trend, and this is a confirmed downtrend — meaning price momentum is working against fundamental value recognition at the current time.
→StableMomentum breakdown
- Expectation
- The 200-day moving average slope turns positive (above 0%) within 6 months, indicating that the sustained downtrend is reversing.
CounterBusiness development companies can trade at discounts to NAV and in downtrends for extended periods while still delivering positive total returns through dividends.
The put-to-call ratio stands at 12.5, an unusually high reading that indicates extreme positioning toward put options relative to calls, which reflects either significant hedging demand or directional bearish bets by options market participants.
→StableKey risks
- Expectation
- The put-to-call ratio falls below 3.0 as hedging demand subsides and market sentiment toward the stock normalizes.
CounterExtremely high put-to-call ratios can be contrarian indicators, as peak pessimism often precedes a sentiment reversal, especially when earnings are beating expectations.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Prospect Capital Corporation offers extreme value at 6.6x forward earnings with a 4-for-4 beat streak and 17.6% free cash flow yield, but is in a confirmed price downtrend with a 1.4%/month declining 200-day moving average slope and faces negative revenue growth of -12%, making the setup a deep value trap risk.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.0 |
| ROA | 2.9 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 0.0 |
| Current ratio | 3.3 |
| FCF quality | 10.0 |
| Moat | 4.8 |
| Rule of 40 | 3.0 |
| Piotroski F | 6.7 |
- ▸FCF-positive despite GAAP loss (FCF margin 31%, FCF yield 18.1%)
- ▸No competitive moat
- ▸Rule of 40: 19 (fail)
Growth
5.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 0.0 |
| EPS growth | 10.0 |
- ▸Declining revenue: -12%
Momentum
4.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 6.3 |
| OBV | 1.0 |
| MA position | 4.5 |
| Volume | 5.1 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope flat
Sentiment
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 3.4 |
| erm sentiment | 5.0 |
- ▸Below analyst target
Insider
7.4/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 9.0 |
| insider conviction | 8.0 |
| holder change | 5.2 |
- ▸Heavy insider buying — $6,671,374 (0.594% of mkt cap)
Peer rank
2.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 9.5 |
| quality rank | 0.7 |
| growth rank | 1.4 |
Technical
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.9 |
| support resistance | 5.7 |
| 52w position | 5.5 |
Risk (lower is worse)
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.2 |
| days to cover | 5.2 |
| volatility | 3.2 |
| put call | 6.7 |
| beta | 8.4 |
| debt equity | 8.5 |
Catalyst
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 5.2 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 2242.0%
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more.
Engine technical detail
verdict_path:
L4:PATH_F_HOLDPassed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:54d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (3)
- MOMENTUM:4.3<4.5
- ASYMMETRY:-3.3=NEGATIVE
- DEATH_CROSS:HARD_BLOCK
Warning (0)
none
Reward-to-Risk
-3.26
Upside
-24.1%
Downside
7.4%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 49
EdgeInst Constrain — Small cap ($1.1B) below institutional reach
SuitabilityAggressive — MCap $1.1B<$5B
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: INSIDER:OK. Top dim: Value at 9.6; weakest: Peer rank at 2.9. No conviction either direction.
The strongest dimensions are Value at 9.6, Insider at 7.4, and Catalyst at 7.0; the weakest are Peer rank at 2.9, Momentum at 4.3, and Sentiment at 4.5. The V9 engine flagged 3 failed gates, producing an asymmetric reward-to-risk of -3.26 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Deep Value Beat Streak
Trip ifQuarterly earnings surprise falls below 0% in at least 2 of the next 4 quarters.
- P2Confirmed Price Downtrend
Trip if200-day moving average slope remains below -1% per month for 6 consecutive months without recovery.
- P3Revenue Declining Negative Growth
Trip ifRevenue declines by more than 15% in the next reported annual period.
- P4Extreme Put Call Ratio Signal
Trip ifPut-to-call ratio rises above 15.0 on any trading day, indicating extreme hedging pressure has intensified beyond current levels.