Saratoga Investment Corp. (SAR) Stock Analysis

Why this analysis is different

• A sector-relative MoonshotScore — five pillars (business quality, financial safety, valuation, growth durability, momentum) re-ranked nightly against the full universe of US-listed common stocks.
• An AI Council read across up to eight perspectives — value, macro, quantitative, and momentum lenses — that shows where they disagree instead of averaging the tension away.
• Figures come straight from FMP and Yahoo Finance filings data. The AI writes the narrative around the numbers — it never edits the numbers.

Saratoga Investment Corp. (SAR) Financial Services Profile

Saratoga Investment Corp. is a BDC specializing in debt and equity investments within lower middle market companies, primarily in the United States. With a focus on leveraged buyouts and growth financings, Saratoga offers tailored financial solutions, distinguishing itself through a high dividend yield and a diversified investment approach across various sectors.

What Is the Investment Thesis for SAR?

Saratoga Investment Corp. presents a compelling investment case driven by its focus on the underserved lower middle market, where financing options are often limited. The company's high dividend yield of 14.67% offers an attractive income stream for investors. With a P/E ratio of 9.6 and a profit margin of 27.8%, Saratoga demonstrates solid profitability and efficient operations. Growth catalysts include the continued expansion of its investment portfolio and strategic deployment of capital in high-growth sectors. Key value drivers include the firm's ability to generate consistent returns through its debt and equity investments and its expertise in structuring customized financing solutions. Potential risks include economic downturns impacting the performance of its portfolio companies and increased competition from other BDCs. Monitoring the company's asset quality and its ability to maintain its dividend payout ratio is crucial for investors.

Based on FMP financials and quantitative analysis

SAR Key Highlights

Market capitalization of $305M indicates a moderate-sized player in the asset management industry.

• P/E ratio of 9.6 suggests the company's stock is reasonably valued compared to its earnings.
• Profit margin of 27.8% demonstrates strong profitability and efficient cost management.
• Gross margin of 75.5% highlights the company's ability to generate significant revenue from its investments.
• Dividend yield of 14.67% provides a substantial income stream for investors, reflecting the company's commitment to returning value to shareholders.

Who Are SAR's Competitors?

SAR is benchmarked below against 8 industry peers on price, market cap, and our AI MoonshotScore.

AI Score by Stock Expert AI · Price data: FMP / Yahoo Finance

What Are SAR's Key Strengths?

High dividend yield attracts income-seeking investors.

• Strong profit margin indicates efficient operations.
• Focus on the underserved lower middle market.
• Diversified investment portfolio across various sectors.

What Are SAR's Weaknesses?

Relatively small market capitalization compared to larger BDCs.

• Dependence on the performance of its portfolio companies.
• Exposure to economic cycles and interest rate fluctuations.
• Managing 0 employees

What Could Drive SAR Stock Higher?

Continued deployment of capital into new and existing portfolio companies.

• Strategic partnerships and co-investment opportunities expanding investment reach.
• Potential for increased fee income through advisory services to portfolio companies.
• Capitalizing on market dislocations to acquire assets at attractive valuations.

What Are the Key Risks for SAR?

Financial-distress signal — its Altman Z-Score of 0.42 sits in the distress zone (elevated bankruptcy risk).

• Inconsistent delivery — missed Wall Street EPS estimates in 4 of the last 8 reported quarters.
• Increased competition from other BDCs and private credit funds.
• Economic downturns impacting the performance of portfolio companies.
• Regulatory changes affecting the BDC industry.
• Interest rate increases reducing the value of debt investments.

What Are the Growth Opportunities for SAR?

• Expanding investment portfolio: Saratoga can grow by strategically deploying capital into new and existing portfolio companies. The lower middle market presents a significant opportunity, with numerous businesses seeking tailored financing solutions. By increasing its investment volume and diversifying its portfolio across various sectors, Saratoga can enhance its revenue streams and reduce concentration risk. This growth strategy is contingent on effective deal sourcing, due diligence, and portfolio management capabilities. The timeline for realizing this growth is ongoing, with continuous efforts to identify and execute new investment opportunities.
• Strategic partnerships and co-investments: Collaborating with other financial institutions and private equity firms can provide Saratoga with access to larger deals and specialized expertise. By forming strategic partnerships, Saratoga can participate in co-investment opportunities, expanding its reach and diversifying its investment portfolio. These partnerships can also provide access to valuable industry insights and networks, enhancing the firm's ability to identify and evaluate potential investment opportunities. The timeline for establishing and leveraging these partnerships is ongoing, with continuous efforts to build and maintain relationships with key industry players.
• Increasing fee income through advisory services: Saratoga can leverage its expertise in financing and operations to offer advisory services to its portfolio companies. By providing strategic guidance and operational support, Saratoga can generate additional fee income and enhance the value of its investments. These services can include financial planning, operational improvements, and strategic planning. The timeline for developing and implementing these advisory services is ongoing, with continuous efforts to expand the firm's capabilities and service offerings.
• Capitalizing on market dislocations: Economic downturns and market volatility can create opportunities for Saratoga to acquire assets at attractive valuations. By maintaining a flexible investment approach and a strong balance sheet, Saratoga can capitalize on market dislocations and generate superior returns. These opportunities may include distressed debt investments, recapitalizations, and opportunistic acquisitions. The timeline for capitalizing on market dislocations is event-driven, with opportunities arising during periods of economic uncertainty and market volatility.
• Leveraging technology to enhance efficiency: Investing in technology can improve Saratoga's operational efficiency and enhance its ability to source, evaluate, and manage investments. By implementing advanced analytics and data management systems, Saratoga can streamline its processes and make more informed investment decisions. These technologies can also improve communication and collaboration with portfolio companies, enhancing the firm's ability to monitor and support their performance. The timeline for implementing these technological enhancements is ongoing, with continuous efforts to adopt and integrate new technologies into the firm's operations.

What Are SAR's Competitive Advantages?

• Expertise in structuring customized financing solutions for lower middle market companies.
• Established relationships with portfolio companies and industry partners.
• Diversified investment portfolio across various sectors.
• Strong track record of generating consistent returns.

What Does SAR Do?

Saratoga Investment Corp., formerly known as GSC Investment Corp., is a business development company (BDC) established to provide customized financing solutions to lower middle market companies. The firm specializes in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions. Saratoga's investment strategy involves structuring investments as debt and equity, utilizing first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. Founded with the aim of filling a critical financing gap for smaller businesses, Saratoga targets companies with EBITDA ranging from $2 million to $50 million and revenues between $8 million and $250 million. The firm seeks to invest between $5 million and $50 million per transaction, often taking a majority stake in the companies it supports. Saratoga's investment approach includes direct lending and participation in loan syndicates, offering flexibility and diversification. Saratoga's portfolio spans various sectors, including 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. Headquartered in New York, with an additional office in Florham Park, New Jersey, Saratoga Investment Corp. continues to focus on supporting the growth and development of U.S.-based lower middle market businesses.

What Products and Services Does SAR Offer?

• Provides leveraged and management buyout financing to lower middle market companies.
• Offers acquisition financing to support companies in their growth strategies.
• Structures growth financing for businesses looking to expand their operations.
• Facilitates recapitalization transactions to optimize companies' capital structures.
• Provides debt refinancing solutions to improve companies' financial flexibility.
• Engages in transitional financing to support companies through periods of change.
• Invests in debt and equity through various instruments, including first and second lien loans, mezzanine debt, and preferred and common equity.

How Does SAR Make Money?

• Generates income through interest payments on debt investments.
• Realizes capital gains from equity investments.
• Collects fees from structuring and managing financing transactions.
• Benefits from the appreciation of its portfolio companies' value.

What Industry Does SAR Operate In?

Saratoga Investment Corp. operates within the asset management industry, specifically focusing on business development companies (BDCs). The BDC sector is characterized by firms that provide financing to small and medium-sized businesses, often filling a gap left by traditional lenders. The industry is influenced by economic cycles, interest rate environments, and regulatory changes. Saratoga competes with other BDCs like Golub Capital BDC, Inc. (GBDC), as well as private credit funds and traditional lenders. The market for lower middle market financing is substantial, with ongoing demand for capital to support growth, acquisitions, and recapitalizations.

Who Are SAR's Key Customers?

• Lower middle market companies seeking financing for buyouts, acquisitions, and growth.
• Companies in sectors such as aerospace, automotive, business services, and healthcare.
• Businesses with EBITDA between $2 million and $50 million and revenues between $8 million and $250 million.

Company Profile

Saratoga Investment Corp. operates in the Asset Management industry within the Financial Services sector. It is headquartered in New York, US. The company is led by CEO Chris Long Oberbeck. SAR has traded publicly since 2007.

Return on equity for Saratoga Investment Corp. stands at 4.2%, a gauge of how efficiently it converts shareholder capital into profit. Return on assets is 1.4%, showing how much profit it generates from its asset base. SAR trades at a trailing price-to-earnings ratio of 9.59, below the Financial Services sector average of ~18x. Its free cash flow yield is -47.7%, a gauge of the cash the business throws off relative to its market value. A current ratio of 5.83 indicates the company holds enough short-term assets to cover its near-term obligations. Its earnings yield is 5.5%, the inverse of the P/E and a quick read on earnings relative to price.

SAR Valuation & Market Position

With a $305M market cap, Saratoga Investment Corp. sits in the small-cap segment of the market. Relative to its peer group, SAR's quantitative score of 30/100 is below the peer average of 77/100.

Quarterly Financial Performance: Saratoga Investment Corp.

Revenue for Saratoga Investment Corp. came in at $30.8M during Q2 2026, a 106.3% improvement versus the preceding quarter. The company recorded a net loss of $5.9M, with diluted EPS of $-0.42. Quarter-over-quarter revenue has been mixed, typical for a small-cap company operating in Financial Services. Across the four most recent quarters, SAR averaged $0.25 in diluted EPS.

Saratoga Investment Corp.'s Piotroski F-Score is 5/9, a 9-point checklist of profitability, leverage and efficiency — a middling fundamental profile. Its Altman Z-Score of 0.42 places it in the distress zone, a signal of elevated financial risk.

Saratoga Investment Corp. has missed Wall Street's EPS estimate in 4 of its last 8 reported quarters — a mixed record worth weighing. Reported results have landed about 5.2% below estimates on average.

Wall Street analysts project Saratoga Investment Corp. revenue of about $125.4M for fiscal 2026, with EPS near $2.48. The estimate reflects 4 contributing analysts.

SAR Financials

SAR Latest News

SAR Analyst Consensus

SAR MoonshotScore

SAR Financial Services Stock FAQ

Disclaimer: This content is for informational purposes only and does not constitute investment advice. Always do your own research and consult a financial advisor.

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