Earnings Miss: Capital Southwest Corporation Missed EPS By 15% And Analysts Are Revising Their Forecasts

It's been a good week for Capital Southwest Corporation (NASDAQ:CSWC) shareholders, because the company has just released its latest annual results, and the shares gained 6.8% to US$21.37. Revenues were in line with forecasts, at US$204m, although statutory earnings per share came in 15% below what the analysts expected, at US$1.47 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

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After the latest results, the five analysts covering Capital Southwest are now predicting revenues of US$226.8m in 2026. If met, this would reflect a meaningful 11% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to surge 61% to US$2.25. In the lead-up to this report, the analysts had been modelling revenues of US$226.4m and earnings per share (EPS) of US$2.31 in 2026. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

Check out our latest analysis for Capital Southwest

It might be a surprise to learn that the consensus price target was broadly unchanged at US$22.92, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Capital Southwest, with the most bullish analyst valuing it at US$25.00 and the most bearish at US$20.50 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Capital Southwest's past performance and to peers in the same industry. We would highlight that Capital Southwest's revenue growth is expected to slow, with the forecast 11% annualised growth rate until the end of 2026 being well below the historical 28% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.4% per year. So it's pretty clear that, while Capital Southwest's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Capital Southwest. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Capital Southwest analysts - going out to 2027, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Capital Southwest (at least 2 which are a bit concerning) , and understanding these should be part of your investment process.