Value
8.9/10data confidence 67%| Component | Sub-score |
|---|---|
| P/E | 5.0 |
| P/S | 9.5 |
| Fwd P/E | 10.0 |
| PEG | 10.0 |
- ▸Forward P/E: 4.3x
- ▸PEG: 0.04
- ▸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. How we score · Editorial policy
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VerdictHOLD
Overall score5.7/10
ConfidenceMEDIUM
MacroRISK_OFF
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.
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. | ↑Improving |
| 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. | ↑Improving |
| 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.
↑ImprovingMomentum 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.
↑ImprovingKey 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.
Per-dimension breakdown
Quality
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 1.1 |
| ROA | 2.9 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 4.3 |
| FCF quality | 10.0 |
| Moat | 5.4 |
| Rule of 40 | 5.5 |
| Piotroski F | 7.8 |
- ▸Strong margins: 24%
- ▸Excellent cash conversion: 157% FCF/NI
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 7/9
Growth
0.8/10data confidence 33%| Component | Sub-score |
|---|---|
| Rev growth | 0.8 |
- ▸Declining revenue: -7%
Momentum
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.0 |
| MACD | 6.1 |
| OBV | 10.0 |
| MA position | 1.0 |
| Volume | 0.9 |
- ▸Capitulation risk (RSI 25, below 200MA)
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -2.7%/30d — confirmed downtrend
Sentiment
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.0 |
| Analyst rating | 5.0 |
| Price target | 8.7 |
- ▸Analyst upside: 32%
Insider
8.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 8.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Notable insider buying — $2,726,315 (0.336% of mkt cap)
- ▸Institutions accumulating
Peer rank
4.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.6 |
| quality rank | 2.8 |
| growth rank | 2.3 |
Technical
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 6.6 |
| support resistance | 8.2 |
| 52w position | 1.3 |
Risk (lower is worse)
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.8 |
| days to cover | 8.0 |
| volatility | 0.0 |
| put call | 6.7 |
| beta | 8.1 |
| debt equity | 8.3 |
- ▸Concentration risks: 2 MED (10-K Item 1A)
Catalyst
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| surprise avg | 10.0 |
| dividend safety | 4.8 |
| news activity | 5.0 |
- ▸Strong earnings: 3B/0M
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Under M&A bid. Hold for deal completion or sell if spread < 3%.
Engine technical detail
verdict_path:
L3:M&A_HOLDPassed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:NO_DATE
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (3)
- MOMENTUM:4.2<4.5
- ASYMMETRY:1.2<1.5@spot
- DEATH_CROSS:HARD_BLOCK
Warning (0)
none
Reward-to-Risk
1.17
Upside
+11.8%
Downside
10.2%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeInst Constrain — Small cap ($0.8B) below institutional reach
SuitabilitySpeculative — Drawdown -43% (>40% off 52w high)
Investment implication
The HOLD_IF_HOLDING verdict reflects the MOMENTUM gate's 4.2<4.5 outcome against Value at 8.9 and asymmetric R:R of 1.17.
The strongest dimensions are Value at 8.9, Insider at 8.3, and Catalyst at 7.0; the weakest are Growth at 0.8, Peer rank at 4.2, and Momentum at 4.2. The V9 engine flagged 3 failed gates, producing an asymmetric reward-to-risk of 1.17 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.