Breaking Down OFS Credit Company, Inc. (OCCI) Financial Health: Key Insights for Investors

You're looking at OFS Credit Company, Inc. (OCCI) because that massive yield-an estimated $1.38 annual dividend, translating to a yield over 28% based on recent prices-is screaming for attention, but the recent financial trajectory needs a defintely close look. The core issue is a persistent gap: for the fiscal quarter ended July 31, 2025, the company reported Core Net Investment Income (Core NII) of only $0.31 per share, while paying out $0.345 in distributions, a classic coverage shortfall that eats into capital. Here's the quick math: the Net Asset Value (NAV) per share dropped from $6.13 at the end of Q3 2025 to a preliminary estimate between $5.41 and $5.51 by October 31, 2025, largely due to distributions exceeding NII and the valuation of its primary investments, which are collateralized loan obligations (CLOs)-complex securities backed by corporate loans. The market is still optimistic, with analysts setting an average price target of $7.13, but you have to ask if the high yield is masking a slow liquidation of NAV. We need to map out if the premium income from their CLO equity positions can stabilize the NAV and justify that Strong Buy rating.

Revenue Analysis

You need to know where OFS Credit Company, Inc. (OCCI) actually makes its money, and the simple answer is interest income from structured credit. The firm's revenue is overwhelmingly driven by its investments in Collateralized Loan Obligation (CLO) equity and debt securities, which are designed to generate current income.

For the 2025 fiscal year, OCCI demonstrated a solid top-line performance, recording an annualized revenue base of approximately $32.55 million. This is a critical number to watch, as it reflects the yield generated by their portfolio of floating-rate credit instruments (CLOs). The core of their business is capturing the spread between the interest income they receive from the underlying corporate loans in the CLOs and the financing costs of the CLO structure itself.

Here's the quick math on recent momentum: OCCI's revenue growth over the last twelve months leading up to the preliminary Q4 2025 results was a strong 23.38%. This is a significant jump, and it defintely shows the benefit of the higher interest rate environment we've been in. When rates rise, the income from their floating-rate CLO assets also rises, which directly boosts their revenue.

The revenue breakdown is straightforward for a closed-end investment company like OCCI. There are no major product or regional segments; it's all about the investment portfolio. The primary revenue streams are:

• Interest Income: Payments from CLO debt and equity securities, which is the vast majority.
• Net Investment Income (NII): The key metric, estimated to be between $0.20 and $0.24 per share for the fiscal quarter ended October 31, 2025.

The significant change in revenue streams isn't a shift in what they invest in, but the performance of those investments due to macroeconomic factors. The higher revenue growth is a direct result of the Federal Reserve's rate hikes, which has increased the yield on their floating-rate assets. However, this also introduces risk-if interest rates fall, that revenue tailwind becomes a headwind. You can dive deeper into the firm's structure and who is investing in it by reading Exploring OFS Credit Company, Inc. (OCCI) Investor Profile: Who's Buying and Why?

To be fair, while Q1 2025 revenue was $10.06 million, the Q3 2025 revenue of $12.05 million shows a positive quarter-over-quarter trend, even though it missed consensus estimates. This table summarizes the recent quarterly performance:

The takeaway here is that OCCI is highly sensitive to interest rate movements. Their revenue growth is strong right now, but it's a function of the current rate cycle. Finance: monitor the yield curve and Fed guidance closely.

Profitability Metrics

You want to know if OFS Credit Company, Inc. (OCCI) is turning its investment income into real profit, especially in a tightening credit market. The short answer is that OCCI maintains a strong operational margin, which is a key measure for a Business Development Company (BDC), but its net profitability is much thinner due to non-operating factors. For the trailing twelve months (TTM) leading up to the most recent data, OCCI posted an impressive Operating Margin of 69.0%, but its Net Margin was significantly lower at 10.9%.

Here's the quick math on the most recent quarter: for the third fiscal quarter ended July 31, 2025, OCCI reported Interest Income of $11.9 million and Net Investment Income (NII) of $6.1 million. This NII is the best proxy for operating profit in a BDC, as it represents income from investments minus operating expenses and interest on debt. This translates to an NII Margin of approximately 51.26% for the quarter. Still, the overall TTM Operating Margin of 69.0% shows a much higher efficiency level over the longer term.

Gross, Operating, and Net Profit Margins

For a company like OFS Credit Company, Inc., which primarily invests in collateralized loan obligation (CLO) equity and debt securities, the profitability metrics look a little different than a typical manufacturer. They don't have a traditional 'Cost of Goods Sold,' so Gross Profit is essentially equal to their total investment income (revenue).

• Gross Profit Margin: This margin is effectively 100.0% for OCCI, which is standard for a financial services company where investment income is the top-line revenue.
• Operating Profit Margin (NII Margin): The TTM Operating Margin of 69.0% is strong, showing that management fees and administrative costs are well-controlled relative to the income generated by the portfolio.
• Net Profit Margin: The TTM Net Margin is just 10.9%. This significant drop from the operating margin is typically a function of realized and unrealized gains or losses on investments, which can be volatile but are crucial to the final bottom line.

This gap between the operating and net margin is defintely where you need to focus your due diligence. What this estimate hides is the impact of mark-to-market changes on the CLO portfolio, which can swing net income wildly.

Trends and Industry Comparison

The trend for the broader BDC sector in 2025 has been one of 'Margin Compression,' meaning the gap between the yield they earn on assets and the cost of their debt is shrinking. The industry-wide Net Interest Margin (NIM) has contracted to under 4.0% as of Q1 2025. OCCI's 51.26% NII Margin for Q3 2025, while a strong operating performance, still represents a sequential increase of 17.0% in NII compared to the prior quarter, which is a positive sign against the general market headwind.

This quarter-over-quarter improvement was primarily driven by an increase in the size of the investment portfolio and a higher interest income yield of 14.38% on the portfolio. OCCI is successfully growing its asset base and deploying capital into new investments with a weighted-average effective yield of 19.05%, which is a clear, actionable indicator of strong operational efficiency and cost management. This focus on high-yield deployment is what keeps their operating margin high, even as the sector faces pressure. You can read more about their investment philosophy at Mission Statement, Vision, & Core Values of OFS Credit Company, Inc. (OCCI).

The risk remains in the Net Margin, as the preliminary Q4 2025 estimates for Net Investment Income per share are expected to range from $0.20 to $0.24, slightly down from the prior quarter's $0.22. This points to the ongoing challenge of maintaining profitability in a volatile environment where the cost of capital and the value of CLO assets are constantly shifting.

Debt vs. Equity Structure

You need to know exactly how OFS Credit Company, Inc. (OCCI) funds its Collateralized Loan Obligation (CLO) investments, because the debt-to-equity balance is the primary driver of both risk and potential return in this sector. The company's financing structure is heavily reliant on a form of hybrid capital, specifically term preferred stock, which acts as its core leverage. This approach gives them a solid, fixed-cost funding base, but it also creates a significant fixed obligation.

As of mid-November 2025, the company's total leverage, primarily in the form of preferred stock, stands at approximately $113.510 million. This preferred stock is a long-term financing instrument, which is a smart move in a volatile rate environment as it locks in the cost of funds. They also maintain a healthy current ratio of 2.24 as of October 31, 2025, suggesting their liquid assets easily cover any short-term obligations. That's a clean balance sheet signal, honestly.

Here's the quick math on their capital structure, using the most recent data:

• Total Common Equity: $150.637 million
• Total Leverage (Preferred Stock): $113.510 million
• Debt-to-Equity Ratio: 0.75:1 (or 75.35%)

The resulting Debt-to-Equity (D/E) ratio of approximately 0.75:1 is quite conservative for a leveraged investment vehicle. For context, Business Development Companies (BDCs), which share a similar regulatory framework, are permitted to operate with a D/E ratio of up to 2.0:1 (200% asset coverage). OFS Credit Company, Inc. is running with a much lower leverage profile, which points to a more defensive stance and less reliance on debt to drive returns, which is defintely a risk-aware position given the current interest rate outlook.

The company balances its capital needs by using both debt (preferred stock) and equity funding. In the fiscal quarter ended July 31, 2025, they raised approximately $10.0 million in net proceeds by issuing 1,538,496 shares of common stock through an At-the-Market (ATM) offering. This is a clear example of using equity to fuel portfolio growth. Plus, in November 2025, they executed a Master Repurchase Agreement for up to $25 million, which provides a flexible, short-term financing option for their CLO securities. This mix shows they are actively managing their capital, using preferred stock for long-term stability and common stock/repurchase agreements for opportunistic growth.

If you want to dig deeper into who is holding this equity and why, you should read Exploring OFS Credit Company, Inc. (OCCI) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

OFS Credit Company, Inc. (OCCI)'s liquidity position is a classic case of strong ratios masking a more complex working capital dynamic. The headline figures for short-term coverage look healthy, but a deep dive into the net current asset value and cash flow statements reveals a reliance on capital markets to fund investment growth and distributions.

Current Ratios: A Healthy Buffer

You want to see liquid assets that can easily cover short-term debts, and on that front, OFS Credit Company, Inc. (OCCI) looks solid. As of the most recent preliminary data from October 31, 2025, the company maintains a healthy Current Ratio of 2.24. This means OCCI has $2.24 in current assets for every dollar of current liabilities. For a financial company that primarily holds Collateralized Loan Obligation (CLO) securities, the Quick Ratio is often identical to the Current Ratio, as inventory is negligible. The Quick Ratio also stands at 2.24. That's a defintely comfortable margin, suggesting no immediate trouble paying bills. One source even cites a TTM Current Ratio of 6.35 for the period ending December 2024, showing the ratio remains robust, even if it has moderated slightly in 2025.

Working Capital and Cash Flow Dynamics

Still, the working capital trend tells a different story. The net current asset value (NCAV), which is simply current assets minus current liabilities, was a negative $-109.70 million on a TTM basis. For an investment firm, this often reflects how assets and liabilities are classified, but it still flags a structural negative working capital position. Here's the quick math on the cash flow statements for the 2025 fiscal year, which shows where the capital is moving:

• Operating Cash Flow (OCF) for the 2025 fiscal year was reported at $0.69 (likely in millions, or per share, which is quite low).
• Investing Cash Flow saw a significant deployment, with net investment deployment of $27.6 million in the third fiscal quarter alone, primarily into CLO opportunities.
• Financing Cash Flow was positive, driven by raising capital. OCCI issued common stock through its At-the-Market (ATM) offering, bringing in net proceeds of $10.0 million in Q3 2025.

The company is generating cash from its core operations (though minimally), but it is actively deploying significant capital into its investment portfolio, which is then funded by raising capital through equity offerings. This is a common but important financing model for a Business Development Company (BDC) or closed-end fund like OCCI.

Near-Term Liquidity Strengths and Risks

The biggest strength is the high current ratio, which provides a strong cushion against short-term market volatility. Plus, management has been proactive in raising capital, like the $10.0 million in net proceeds from the ATM offering in Q3 2025, which bolsters the balance sheet. The primary risk is the reliance on financing activities to support investment growth and, critically, the dividend. The preliminary Net Investment Income (NII) per share for Q4 2025 is estimated to be between $0.20 and $0.24. This NII must cover the company's distributions, and if it consistently falls short, the company must dip into capital or sell assets, which pressures the Net Asset Value (NAV) per share.

What this estimate hides is the quality of the CLO portfolio itself-the true, long-term liquidity of the assets. You need to understand the underlying collateral to truly gauge the risk. For a broader view of their strategy, you can review the Mission Statement, Vision, & Core Values of OFS Credit Company, Inc. (OCCI).

Action: Portfolio Managers: Stress-test the CLO portfolio's fair value against a 50-basis-point increase in default rates by the end of the month.

Valuation Analysis

You're looking at OFS Credit Company, Inc. (OCCI) and wondering if the market has it right. The short answer is that the stock looks cheap on a forward earnings basis, but its high dividend yield and negative Net Asset Value (NAV) trend signal a serious risk that the market is defintely pricing in.

As a closed-end management investment company (CEF) focused on collateralized loan obligation (CLO) equity and debt, OFS Credit Company, Inc. is a unique animal. We need to look beyond the simple trailing metrics because its recent performance has been volatile. Here's the quick math on its valuation as of November 2025, using the most relevant TTM (Trailing Twelve Months) and forward-looking data available.

The P/B ratio of just 0.79 suggests undervaluation, which is common for closed-end funds whose Net Asset Value (NAV) per share has been under pressure. The estimated NAV per share for the fiscal quarter ending October 31, 2025, was between $5.41 and $5.51, against a recent stock price around $4.55.

Stock Price and Analyst Sentiment

The stock price trend tells a story of significant investor skepticism. The stock price for OFS Credit Company, Inc. has declined by a sharp -36.63% in 2025 alone, and dropped by -21.14% just in the last three months leading up to November 2025. The 52-week high was $7.58, so the current price of around $4.55 is a deep discount from its recent peak.

Still, Wall Street analysts are surprisingly bullish. The consensus rating is overwhelmingly positive, with 2 Buy ratings and 0 Hold or Sell ratings. The median price target is set at $7.13, which implies a substantial 57.3% upside from the current trading level. That's a massive gap between market action and analyst conviction.

Dividend Sustainability Check

You can't talk about a CEF like OFS Credit Company, Inc. without talking dividends. The yearly dividend yield is extraordinarily high, sitting between 27.99% and 36.07%, depending on the calculation basis. But here's the rub: the dividend payout ratio is cited as high as 336.07% of its income. That is not a sustainable payout ratio.

What this estimate hides is the fact that the dividend is no longer supported by earnings, which signals a high risk of a future dividend cut to preserve capital. For a deeper look at who is buying and why, you should check out Exploring OFS Credit Company, Inc. (OCCI) Investor Profile: Who's Buying and Why?

• Watch the NAV: If it keeps dropping below $5.41, the stock price will follow.
• Expect a cut: A 336.07% payout ratio means the dividend is on borrowed time.
• Wait for clarity: Don't jump in just for the yield; wait for a clear turn in NAV or a dividend adjustment.

Risk Factors

You're looking at OFS Credit Company, Inc. (OCCI) because of its high-yield potential, but you need to understand the structural risks baked into its Collateralized Loan Obligation (CLO) focus. The direct takeaway is this: while the floating-rate nature of its underlying assets offers a defense against rising interest rates, the concentration in CLO equity and debt securities exposes the fund to significant credit deterioration risk, which is already visible in the Net Asset Value (NAV) erosion.

Honestly, the biggest near-term risk is the continued pressure on the fair value of their CLO equity positions. For the fiscal quarter ending October 31, 2025, the preliminary Net Asset Value per share was estimated between $5.41 and $5.51. This is down slightly from the $6.13 NAV per share reported just a few months earlier at the end of Q3 2025. This decline is primarily driven by net realized losses, which is a clear sign that some of the underlying corporate loans are struggling. The market is pricing this in, too; the stock is trading at a significant discount to that estimated NAV.

Here's a quick look at the core financial and operational risks we see in the 2025 data:

• CLO Equity Volatility: Net realized losses from CLO equity investments are causing NAV deterioration.
• Credit Quality Exposure: A significant portion of the portfolio is in investments with poor credit ratings, raising the potential for a growing number of borrower defaults.
• Cash Flow Squeeze: Core Net Investment Income (Core NII) for Q3 2025 was $0.31 per common share, a decrease from the prior quarter, mainly due to lower cash flows on CLO equity from tightening loan spreads.

The company is a non-diversified, externally managed closed-end investment company, so its fate is tied directly to the health of the leveraged loan market and the skill of its manager, OFS Capital Management, LLC.

External and Macroeconomic Headwinds

The external risks are the usual suspects, but they are particularly acute for a CLO-focused fund. The primary external risk is a full-blown recession, which would trigger a wave of corporate defaults in the underlying loan pools, crushing the value of the CLO equity tranches OFS Credit Company, Inc. holds. You can't ignore the global picture either; management explicitly flagged instability in the U.S. and international banking systems, plus geopolitical conflicts in Ukraine and the Middle East, as factors that could materially impact its financial condition after October 31, 2025.

The firm is also exposed to regulatory risk. Since the fund operates in a specialized credit market, any new regulations concerning structured credit or leveraged lending could impact the creation and performance of new CLOs, which is their lifeblood. To be fair, the company has shown some resilience, with preliminary Q4 2025 NII per share holding stable between $0.20 and $0.24, despite these headwinds. That stability is a good sign, but it doesn't eliminate the structural risks. If you want to dive deeper into who is buying this stock despite the risks, check out Exploring OFS Credit Company, Inc. (OCCI) Investor Profile: Who's Buying and Why?

Mitigation and Actionable Steps

The most significant mitigation strategy for OFS Credit Company, Inc. is structural: its CLO investments are primarily in floating rate loans. This means when the Federal Reserve raises rates, the income generated by the underlying loans increases, providing a natural hedge against the rising cost of capital. This is defintely a key defensive quality in a high-rate environment. Furthermore, the company reported a healthy current ratio of 2.24, suggesting its liquid assets comfortably cover its short-term obligations.

For you, the investor, the action is simple: focus on the distribution coverage. The high dividend coverage rate of 165% (based on a $0.345 quarterly payout and $0.57 Core NII in Q1 2025) suggests the current $0.115 monthly distribution is well-supported by earnings, for now.

Finance: Track Core NII coverage of the distribution quarterly to ensure the cash flow remains strong enough to sustain the yield.

Growth Opportunities

You're looking for a clear path forward for OFS Credit Company, Inc. (OCCI) beyond the current volatility, and honestly, the growth story is less about a sudden acquisition and more about their deep expertise in one specific, complex corner of the credit market: Collateralized Loan Obligations (CLOs). The near-term opportunity for OCCI is leveraging their floating-rate portfolio structure to maximize net investment income (NII) in this higher-for-longer interest rate environment.

The core growth driver is OCCI's continuous investment in CLO equity and debt securities, which are designed to generate high current income. Their strategic initiative to execute a Master Repurchase Agreement with Nomura Securities International, involving up to $25 million in repurchase transactions for CLO securities, is a clear action that enhances their funding flexibility and capacity to make new investments. That's how they keep the engine running.

Here's the quick math on projections: The company's annualized revenue base is approximately $32.55 million, and the consensus for next year's earnings per share (EPS) is expected to be around $0.86, a slight projected decrease of -3.37% from the prior year's estimate, which shows the market is a trend-aware realist, too. Still, analysts see a potential upside, with an average one-year price target of $7.27.

• Maximize NII from floating-rate assets.
• Use the $25 million Nomura facility for new CLO purchases.
• Maintain a high-yield distribution (around 19.5%).

The real competitive advantage positioning OCCI for growth is the dual experience of its manager, OFS Capital Management. They act as both a CLO equity investor, which requires structuring expertise, and a CLO manager, which provides deep knowledge of the underlying senior secured corporate loans. Their senior management averages over 25 years of experience in structuring and investing in this asset class. You defintely want that kind of specialized knowledge managing your CLO exposure.

The floating-rate nature of their investments is a key product innovation that acts as a natural hedge against interest rate risk, which is crucial right now. This structure is a primary reason the preliminary Q4 2025 Net Investment Income per share is estimated to hold firm between $0.20 and $0.24. What this estimate hides, however, is the impact of net realized and unrealized losses on CLO equity, which can still drag down the Net Asset Value (NAV) per share-which was estimated between $5.41 and $5.51 as of October 31, 2025.

To be fair, the CLO market is a deep asset class, with about $1.1 trillion of CLOs outstanding. OCCI is positioned to capture a slice of that market by focusing on the equity tranches, which offer the highest potential distributions but also carry the most risk. You can get a clearer picture of their long-term focus by reviewing their Mission Statement, Vision, & Core Values of OFS Credit Company, Inc. (OCCI).

Here is a snapshot of their recent performance against estimates, which shows the execution challenge:

The takeaway is simple: OCCI's growth is tied to their ability to continue sourcing new, low-cost CLO investments and for the underlying corporate loan portfolios to remain healthy, which is a constant battle in a high-rate environment.