Capital Southwest Corporation (CSWC): fair value, margin of safety and Wheel Score

Is CSWC undervalued?

Capital Southwest Corporation (CSWC) closed at 23.52 on 16 Oct 2026. The GLS average fair value - the simple average of the 7 valuation models that produced a positive number - is 33.91, which puts the price 31% below it. 5 of the 7 models value the shares above the current price. A gap this wide is rare in our universe of ~7,400 US stocks and is exactly what the Value part of the Wheel Score rewards; it is also where the question "why is it this cheap?" matters most.

The 7 models disagree widely: Lynch gives 7.24 while DCF gives 85.15. A spread that wide means the average is sensitive to which methods you trust; the model table below shows where each one lands, and the Quote page lets you switch any of them off.

The nightly engine files CSWC under High Yield Income: a dividend yield above 4%.

Nine valuation models for CSWC

Each model turns the latest filed numbers into a value per share; the GLS fair value is the simple average of the ones that produce a positive number. The last two rows are shown for reference and never enter the average. The Quote page lets you switch any model off and add your own margin of safety.

Quality and financial health

Financial health is weak: CSWC passes 4 of the nine Piotroski tests. Our screens drop the stock at the health rule; a low score is often the reason a stock looks cheap on the valuation models. The GLS Moat score is low at 3.8 out of 10, which says the ten-year record of revenue, earnings, margins and returns on capital has been inconsistent - growth and shocks rather than steady compounding.

Returns on capital are moderate - ROIC 5.3%, ROE 11.2%, ROA 5.2% - with debt at 1.12 times equity and negative free cash flow.

The dividend yield is high at 10.89% (payout ratio 137%) - a payout above 100% of earnings, which is not covered by profits. A yield this size is often the market's way of pricing a risk to the payout, so the health score and cash flow matter more than usual.

Institutional ownership scores 4/10, insider activity 7/10 and Congressional trading 5/10 on the GLS smart-money scales; the last recorded insider buy was on 1 Oct 2026.

Wheel Score 65: Good

CSWC scores 65 out of 100 on the Wheel Score (Good band, 65-79). The score blends the margin of safety (Value, 25/25), Piotroski health (9/20), the GLS moat (6/15), the option premium on offer (11/20) and how easily the stock trades (14/20). Moat (6/15) is the part holding the score back.

Implied volatility is 26% on the near-the-money contracts 20-60 days out: some premium, but under the 35-60% range the Wheel Score pays full marks for (11 of 20 points). Chain open interest is 15,676 contracts across all expiries - enough for the wheel at normal size.

Volume runs at 788k shares a day on a market cap of $1.5B, with a beta of 0.75 - a low beta, so day-to-day moves are smaller than the market's; the Stability part of the Wheel Score gives that 14 of 20.

The Wheel Score ranks ~7,400 US stocks for selling cash-secured puts and covered calls; it is updated nightly and is not a recommendation. The walkthrough lesson shows how the score fits into a trade, start to finish.

Upcoming events

The next earnings report is due on 2 Nov 2026 (after the close), 17 days away; a 30-45-day put sold today would expire after it, which is worth weighing against the premium. The shares go ex-dividend on 13 Nov 2026 (0.1934 per share), so a covered call sold before then carries a small early-assignment risk around that date.

Earnings, dividend, IPO, split and economic calendars for the whole market, filterable to your watchlists.

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The 12 companies below are the closest to Capital Southwest Corporation by market cap within the Asset Management industry, each with its own fact sheet; the Compare page puts up to eight of them side by side.

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