Saratoga Investment Corp. (SAR): BCG Matrix [Dec-2025 Updated]

You're looking at Saratoga Investment Corp. (SAR)'s strategy, and honestly, it's a textbook case of balancing growth and stability using the BCG Matrix as of late 2025. Their massive 88.7% core First Lien lending business is the clear Star, delivering superior credit quality with non-accruals at only 0.3%, while the established CLO management acts as a reliable Cash Cow generating $3.81 in Adjusted NII per share for Fiscal Year 2025. The real intrigue, however, lies in how they plan to deploy that hefty $204.7 million cash reserve-the Question Mark-to fuel future growth, all while keeping legacy Dogs to a minimum. Keep reading to see exactly where your capital is positioned within this framework.

Background of Saratoga Investment Corp. (SAR)

Saratoga Investment Corp. (SAR) operates as a business development company (BDC), which means you're looking at a firm that provides customized financing solutions directly to U.S. middle-market businesses. Their main goal is to generate attractive risk-adjusted returns by focusing on current income and long-term capital appreciation from their investments.

The investment strategy centers on debt, primarily senior and unitranche leveraged loans, and mezzanine debt, though they also take equity positions. This financing supports change of ownership transactions, strategic acquisitions, recapitalizations, and growth initiatives alongside business owners and financial sponsors.

Looking at the end of their 2025 fiscal year, which closed on February 28, 2025, Saratoga Investment Corp. managed Assets Under Management (AUM) totaling approximately $978,078 thousand, with a Net Asset Value (NAV) of $392,666 thousand, or $392.7 million. Their portfolio at that time was spread across 48 portfolio companies, one collateralized loan obligation fund (CLO), and one joint venture fund (JV).

Financially, for the year ended February 28, 2025, Total Investment Income reached $148,855 thousand, translating to an Adjusted Net Investment Income (NII) per share of $3.81. You'll note that the company reduced its non-accruals significantly to just 0.3% of Fair Value by that fiscal year-end.

As of the most recent data point, the fiscal second quarter ended August 31, 2025, the AUM had grown slightly to $995,295 thousand, and the NAV stood at $410,500 thousand, with NAV per share at $25.61. The annualized return on equity for that quarter was a strong 13.8%, beating the BDC industry average of 7.3%. Furthermore, credit quality improved, with only one investment remaining on non-accrual status, representing just 0.2% of the portfolio at fair value.

To show activity near your late 2025 timeframe, Saratoga Investment Corp. announced a special cash distribution of $0.25 per share in November 2025, intended to fulfill final Fiscal Year 2025 spillover income distribution requirements, which they are aligning with their regular monthly dividend. For the full fiscal year 2024, dividends declared totaled $3.31 per share, which included a $0.35 special dividend.

Saratoga Investment Corp. (SAR) - BCG Matrix: Stars

You're analyzing Saratoga Investment Corp. (SAR)'s portfolio to map its business units onto the Boston Consulting Group (BCG) Matrix as of 2025. The Stars quadrant represents the core, high-market-share assets in high-growth segments. For Saratoga Investment Corp., this is clearly its primary lending activity, which demands significant capital to maintain its leading position in the middle market.

The primary driver of Saratoga Investment Corp.'s Star status is the concentration in its most secure and active investment type. This segment requires continuous investment to capture growth opportunities in the middle market, which is the engine for future Cash Cows.

• Core First Lien Senior Secured Loans, representing 88.7% of the portfolio as of the end of Fiscal Year 2025 (February 28, 2025), are positioned in the high-growth middle-market Business Development Company (BDC) space.
• This segment exhibits superior credit quality, with non-accruals at only 0.3% of fair value for Fiscal Year 2025, significantly outperforming the industry average.
• The business shows continued Net Asset Value (NAV) growth, with NAV per share increasing sequentially to $25.61 as of August 31, 2025.
• Saratoga Investment Corp. maintains a strong origination capability, deploying $168.1 million in new investments during Fiscal Year 2025 (year ended February 28, 2025).

The sheer volume of capital deployed into this segment validates its position as a Star. Stars consume large amounts of cash to fuel their growth, which is why Saratoga Investment Corp. needs strong origination and liquidity management. If this high-growth market slows while Saratoga Investment Corp. maintains its dominant market share, these assets are set to transition into the Cash Cow quadrant.

Here's a quick look at the key financial metrics supporting this classification for the Star segment:

Maintaining this success requires ongoing investment, which is why the strategy for Stars is to invest heavily. The sequential growth in NAV per share from $25.52 as of May 31, 2025, to $25.61 as of August 31, 2025, shows this investment is currently yielding positive results in terms of shareholder value.

Saratoga Investment Corp. (SAR) - BCG Matrix: Cash Cows

You're looking at the established, high-market-share segments of Saratoga Investment Corp. (SAR) that reliably fund the rest of the operation. These are the units that generate more cash than they consume, which is exactly what you want from a Cash Cow in your portfolio.

The core of this stable cash generation comes from the asset management side of the business, which requires minimal new capital deployment to maintain its output. This segment is characterized by stable, fee-based income plus the income derived from retained equity or subordinated notes in the managed vehicles.

Here are the key financial indicators supporting the Cash Cow classification for Saratoga Investment Corp. for the Fiscal Year 2025, which ended on February 28, 2025:

• The established CLO Management Business structure includes a managed $650 million Collateralized Loan Obligation (CLO) fund and a co-managed Joint Venture (JV) CLO fund with $400 million in assets.
• Adjusted Net Investment Income (NII) per share for the full Fiscal Year 2025 reached $3.81.
• Total dividends declared for Fiscal Year 2025 amounted to $3.31 per share.
• This total dividend included a special dividend of $0.35 per share declared in the quarter ended November 30, 2024.
• The trailing twelve months Return on Equity (ROE) for Fiscal Year 2025 was 7.5%.

The math here is straightforward: the $3.81 in Adjusted NII per share for the year comfortably covered the $3.31 in total declared dividends per share. Honestly, that over-earning provides the cushion you need for administrative costs or unexpected portfolio events.

Consider the scale of the revenue-generating base that supports this performance:

• Total Investment Income for Fiscal Year 2025 was $148,855 thousand.
• Assets Under Management (AUM) as of February 28, 2025, stood at $978,078 thousand, or $978.1 million.
• The portfolio as of that date included investments across 48 portfolio companies, one CLO fund, and one JV fund.

To give you a clearer picture of the earnings power supporting these distributions, look at the comparison between the annual figures:

Even with a slight sequential dip in the fourth quarter of Fiscal Year 2025 Adjusted NII per share to $0.56, the full-year performance demonstrates the stability you expect from a Cash Cow. You want to maintain the infrastructure supporting these funds, perhaps investing just enough to improve efficiency and keep that cash flow steady, rather than pouring in growth capital.

Saratoga Investment Corp. (SAR) - BCG Matrix: Dogs

You're looking at the parts of Saratoga Investment Corp. (SAR) that require careful management because they operate in low-growth areas and hold a small slice of the market. These units frequently just break even, tying up capital without offering much return, making them prime candidates for divestiture if a clear path to profitability doesn't emerge.

The most significant item fitting this profile is the $\text{650 million Collateralized Loan Obligation (CLO) fund}$ Saratoga Investment Corp. manages, which is currently in a wind-down phase. This process means management attention is diverted to orderly liquidation rather than new origination or growth, which is a classic characteristic of a Dog in the portfolio strategy. Also, legacy non-accrual investments, even after reductions, still consume valuable management resources that could be better spent elsewhere. Honestly, any investment that requires constant monitoring just to stay afloat is a drain.

Here's a quick look at the financial metrics associated with these lower-performing or winding-down segments as of the latest available reports:

The effort to clean up credit issues, which often fall into the Dog category during the workout phase, shows progress, but the remaining items still demand focus. As of the quarter ended August 31, 2025, the situation had significantly improved from prior periods:

• Investment quality remains strong with $\text{99.7%}$ of loan investments holding the highest internal rating.
• Only $\text{one investment}$ remains on non-accrual status.
• This single non-accrual represents just $\text{0.2%}$ of the total portfolio fair value.
• The Zollege investment, previously a concern, returned to accrual status.

The impact of these legacy and structural issues is visible in quarterly marks. For the fourth quarter of fiscal year 2025, which ended February 28, 2025, Saratoga Investment Corp. recorded a $\text{net unrealized depreciation in the CLO and JV of \$2.7 million}$. This specific mark reflects the ongoing valuation pressures within those structured products, separate from the core BDC portfolio marks.

Saratoga Investment Corp. (SAR) - BCG Matrix: Question Marks

The Question Marks quadrant for Saratoga Investment Corp. represents investments in growing markets where the company is actively seeking to establish a larger market share, primarily through new platform investments. These plays are inherently high-risk, high-reward, targeting long-term capital appreciation.

The deployment of capital into new, unproven middle-market platforms is the core activity aligning with this BCG category. The fiscal year ended February 28, 2025, showed initial traction in this area, with three investments in new portfolio companies for the full year.

The smaller, non-core investments in Mezzanine Debt and Equity are part of the overall strategy, though the specific allocation to these smaller plays within the Question Marks category is not separately itemized in the latest reports. The portfolio as of February 28, 2025, consisted of investments principally in 48 portfolio companies, one collateralized loan obligation fund (the CLO), and one joint venture fund (the JV), with a total fair value of $978.1 million, excluding cash.

A significant factor defining the potential for Question Marks is the substantial cash position Saratoga Investment Corp. held at the end of the fiscal year. As of February 28, 2025, the company reported $204.7 million in cash and cash equivalents. This liquidity is crucial for aggressively funding the growth of these new platforms.

The strategy centers on deploying this large cash reserve into new, unproven middle-market platforms to drive future Assets Under Management (AUM) growth. The total undrawn borrowing capacity available to Saratoga Investment Corp. as of February 28, 2025, was $428.2 million, which includes the $204.7 million cash position, $87.5 million available under credit facilities, and $136.0 million in undrawn SBA debentures.

• The cash position of $204.7 million as of February 28, 2025, is currently un-deployed.
• Net Deployments for the Fiscal Fourth Quarter 2025 were $25.9 million, supporting one new platform and six follow-ons.
• Subsequent to February 28, 2025, Saratoga Investment executed approximately $45.5 million of new originations across two new platform companies and six follow-ons by the time of the May 7, 2025 announcement.
• The company's AUM as of February 28, 2025, was $978,078 thousand (or $978.1 million).