Breaking Down FS KKR Capital Corp. (FSK) Financial Health: Key Insights for Investors

Are you looking for a business development company that specializes in providing credit solutions to private middle-market U.S. companies? Have you been keeping an eye on FS KKR Capital Corp. (FSK) and wondering about its financial stability? As of December 31, 2024, the company's investment portfolio had a fair value of $13.5 billion, with 63.8% invested in senior secured securities. The board of directors has declared a first quarter 2025 distribution of $0.70 per share. Read on to explore key insights into FSK's financial health, dissecting critical metrics and portfolio strategies to help you make informed investment decisions.

FS KKR Capital Corp. (FSK) Revenue Analysis

For investors eyeing FS KKR Capital Corp. (FSK), understanding the company's revenue streams is crucial for assessing its financial health and future prospects. Let's break down the key components of FSK's revenue generation.

FS KKR Capital Corp. primarily generates revenue through interest income from its investments in debt securities, including first lien senior secured loans, second lien secured loans, and subordinated debt. Additionally, the company may generate revenue from:

• Dividend income from equity investments.
• Fee income, including structuring, commitment, and amendment fees.
• Capital gains from the sale of investments.

Analyzing year-over-year revenue growth provides insights into the company's operational efficiency and market conditions. While specific percentage increases or decreases can fluctuate based on investment performance and market dynamics, examining historical trends reveals FSK's ability to adapt and grow its revenue base.

To provide a clearer picture, here's a hypothetical breakdown of the contribution of different business segments to FSK's overall revenue (illustrative data):

Keep in mind that these percentages are illustrative and can vary based on FSK's portfolio composition and market conditions. Investors should refer to FSK's official financial statements for the most accurate and up-to-date information.

Significant changes in revenue streams, such as shifts in investment strategy or market interest rates, can materially impact FSK's financial performance. Monitoring these changes is essential for investors seeking to make informed decisions.

Further insights into the types of investors that are investing in FSK can be found here: Exploring FS KKR Capital Corp. (FSK) Investor Profile: Who’s Buying and Why?

FS KKR Capital Corp. (FSK) Profitability Metrics

Assessing the profitability of FS KKR Capital Corp. (FSK) involves a detailed look at its gross profit, operating profit, and net profit margins. These metrics provide insights into how efficiently FSK generates profit from its revenue and manages its expenses. Analyzing these figures over time helps to identify trends and potential areas of concern or improvement.

When evaluating FSK's profitability, it's essential to compare its ratios with industry averages. This benchmark helps determine whether FSK is performing on par with, better than, or worse than its competitors. Key profitability ratios to consider include:

• Gross Profit Margin: Indicates the percentage of revenue remaining after deducting the cost of goods sold (COGS).
• Operating Profit Margin: Shows the percentage of revenue remaining after deducting operating expenses, excluding interest and taxes.
• Net Profit Margin: Represents the percentage of revenue remaining after deducting all expenses, including interest and taxes.

Operational efficiency plays a crucial role in FSK's profitability. Effective cost management and favorable gross margin trends can significantly impact the bottom line. For instance, a rising gross margin suggests that FSK is either increasing its prices or reducing its production costs, both of which are positive signs.

FS KKR Capital Corp. reported its financial results for the fiscal year 2023. The company’s net investment income was approximately $492 million, or $2.07 per share. Furthermore, the adjusted net investment income stood at $522 million, which translates to $2.20 per share. These figures reflect the company's earnings from its investment portfolio, providing insight into its core operational profitability. The company’s total investment income for the year amounted to $1.27 billion.

Here's a look at FS KKR Capital Corp.'s financial performance for 2023, compared to the previous year:

Additionally, it is worth exploring Exploring FS KKR Capital Corp. (FSK) Investor Profile: Who’s Buying and Why?

FS KKR Capital Corp. (FSK) Debt vs. Equity Structure

Understanding how FS KKR Capital Corp. (FSK) finances its operations is crucial for investors. The balance between debt and equity reveals insights into the company's financial strategy, risk profile, and growth potential. Let's delve into the specifics of FSK's debt levels, ratios, and financing activities.

As of December 31, 2023, FS KKR Capital Corp. reported total investments of $15.3 billion. A significant portion of these investments is supported by a mix of debt and equity financing. Understanding the specifics of this structure is key to assessing the company’s financial health.

Here’s a breakdown of FS KKR Capital Corp.'s debt profile:

• Long-Term Debt: As of December 31, 2023, FS KKR Capital Corp. had approximately $6.26 billion in outstanding long-term debt. This includes various notes and loans with differing maturity dates and interest rates.
• Short-Term Debt: The company also utilizes short-term debt, primarily through its revolving credit facilities. As of December 31, 2023, short-term debt stood at $725.0 million.

The debt-to-equity ratio is a critical metric for evaluating a company's financial leverage. FS KKR Capital Corp.'s debt-to-equity ratio can provide insights into its risk profile compared to industry standards.

• Debt-to-Equity Ratio: As of December 31, 2023, FS KKR Capital Corp.'s debt-to-equity ratio was approximately 1.21x. This ratio indicates the extent to which the company is using debt to finance its assets relative to equity.

Recent financing activities, such as debt issuances and refinancing, play a significant role in shaping FS KKR Capital Corp.'s capital structure.

• Recent Debt Activities: In January 2024, FS KKR Capital Corp. issued $500 million in aggregate principal amount of its 6.375% notes due 2029. These notes will mature on January 17, 2029, and interest is payable semi-annually on January 17 and July 17 of each year, commencing on July 17, 2024.
• Credit Ratings: FS KKR Capital Corp. maintains credit ratings from major rating agencies, reflecting their assessment of the company's creditworthiness. As of April 2024:
  • Moody’s: Baa3
  • S&P: BBB-
  • Fitch: BBB-

Balancing debt and equity is a strategic decision for FS KKR Capital Corp. Here’s how the company approaches this balance:

• Strategic Balance: FS KKR Capital Corp. strategically manages its debt and equity to optimize its capital structure. This involves carefully considering the cost of debt, market conditions, and investment opportunities.
• Equity Funding: While debt forms a significant part of its capital structure, FS KKR Capital Corp. also relies on equity funding through retained earnings and, at times, the issuance of new shares.

A well-managed balance between debt and equity is vital for sustaining growth and managing risk, impacting its ability to generate returns for investors. Understanding this balance offers valuable insights into the company's strategic financial management. You might also be interested in: Mission Statement, Vision, & Core Values of FS KKR Capital Corp. (FSK).

FS KKR Capital Corp. (FSK) Liquidity and Solvency

Analyzing FS KKR Capital Corp.'s liquidity involves examining its ability to meet short-term obligations. Key metrics like the current and quick ratios provide insights into its liquidity position. Additionally, understanding working capital trends and reviewing cash flow statements is crucial for a comprehensive assessment. Breaking Down FS KKR Capital Corp. (FSK) Financial Health: Key Insights for Investors

For the fiscal year 2024, assessing FS KKR Capital Corp.'s liquidity position requires a close look at specific financial ratios and cash flow dynamics:

• Current Ratio: This ratio measures a company's ability to pay short-term obligations with its current assets.
• Quick Ratio: Similar to the current ratio, but excludes inventory, providing a more conservative view of liquidity.

Analyzing working capital trends involves examining the difference between a company's current assets and current liabilities over a period of time. A positive working capital balance indicates that a company has enough short-term assets to cover its short-term liabilities. Monitoring the changes in working capital can reveal whether a company's liquidity position is improving or deteriorating.

Cash flow statements provide a detailed overview of all cash inflows and outflows during a specific period, categorized into operating, investing, and financing activities:

• Operating Cash Flow: Cash generated from the company's core business activities.
• Investing Cash Flow: Cash used for investments in assets, such as property, plant, and equipment.
• Financing Cash Flow: Cash related to debt, equity, and dividends.

Here's a hypothetical overview of FS KKR Capital Corp.'s cash flows for the fiscal year 2024 (Note: The figures below are illustrative and should be replaced with actual values from FS KKR Capital Corp.'s financial statements):

Positive operating cash flow is generally a good sign, indicating that the company is generating cash from its core business operations. Negative investing cash flow suggests that the company is investing in its future growth. Negative financing cash flow could mean the company is paying off debt or distributing dividends.

Potential liquidity concerns might arise if the company has a consistently low current ratio, declining working capital, or negative operating cash flow. Conversely, strengths would include a high current ratio, increasing working capital, and strong positive operating cash flow.

FS KKR Capital Corp. (FSK) Valuation Analysis

Determining whether FS KKR Capital Corp. (FSK) is overvalued or undervalued requires a multifaceted approach, incorporating key financial ratios, stock performance analysis, and analyst sentiment. Let's delve into these aspects to provide a clearer picture for investors.

Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) Ratios:

• P/E Ratio: As of April 2025, a recent P/E ratio might not be the most relevant metric for a BDC like FS KKR Capital Corp. because net income can be significantly influenced by investment gains and losses.
• P/B Ratio: The price-to-book ratio is often a more reliable valuation metric for BDCs.
• EV/EBITDA: Given that FS KKR Capital Corp. operates as a financial entity, EBITDA might not be the most indicative measure of performance compared to metrics that are specific to financial institutions.

Stock Price Trends: Examining the stock price trends over the past year provides insights into market sentiment and investor confidence.

• Over the last 12 months, FS KKR Capital Corp. has shown a price fluctuation, reflecting broader market trends and company-specific developments.

Dividend Yield and Payout Ratios: For income-focused investors, dividend yield and payout ratios are critical.

• FS KKR Capital Corp. has a dividend yield of approximately 13.18% as of April 18, 2024, showcasing its appeal as an income-generating investment.
• The company's dividend payout ratio should be analyzed in the context of its earnings and cash flow to ensure sustainability.

Analyst Consensus: Analyst opinions provide a consolidated view of the stock's potential.

• Analyst ratings range from 'buy' to 'hold', reflecting varied perspectives on FS KKR Capital Corp.'s prospects.
  • For example, one analyst has a 'buy' rating with a price target of $21.00.
  • Another analyst has a 'hold' rating with a price target of $18.00.

To further contextualize FS KKR Capital Corp.'s operations and strategic goals, refer to Mission Statement, Vision, & Core Values of FS KKR Capital Corp. (FSK).

Additional Factors to Consider:

When evaluating FS KKR Capital Corp., consider these factors:

• Asset Quality: The quality of FS KKR Capital Corp.'s investment portfolio is paramount. High levels of non-performing assets can negatively impact earnings and valuation.
• Management Efficiency: A well-managed BDC can navigate market challenges and capitalize on opportunities, enhancing shareholder value.
• Macroeconomic Conditions: Interest rate changes and economic growth influence the performance of BDCs and their portfolio companies.

Below is a table summarizing key aspects of FS KKR Capital Corp.'s valuation. Note that the data is based on the latest available information and may vary across different financial sources.

FS KKR Capital Corp. (FSK) Risk Factors

Several internal and external factors could significantly impact FS KKR Capital Corp.'s financial health. These encompass industry competition, regulatory changes, and broader market conditions. Understanding these risks is crucial for investors.

Key risks identified include:

• Market and Economic Risks: Changes in the financial markets and overall economic conditions can affect FSK's business.
• Credit Risks: FSK faces risks related to the credit quality of its portfolio companies.
• Interest Rate Risks: Fluctuations in interest rates can impact FSK's earnings.
• Liquidity Risks: There's a risk that FSK may not be able to meet its financial obligations as they come due.
• Regulatory and Legal Risks: Changes in regulations and legal challenges can affect FSK's operations.

In their 10-K filing for the fiscal year ended December 31, 2024, FS KKR Capital Corp. highlighted several key risks:

Market and Economic Risks:

Adverse market conditions could lead to decreased net asset value and hinder FSK's ability to raise capital. The success of FSK depends on various factors, including:

• The state of the economy
• Political stability
• Global trade dynamics
• Socio-demographic trends
• Developments in law and tax policy

Credit Risks:

FSK is exposed to the risk that borrowers may default on their obligations. Deterioration in the credit quality of their portfolio could result in:

• Reduced investment values
• Decreased returns
• Potential write-offs

Interest Rate Risks:

Changes in interest rates can affect FSK's net investment income. Rising rates could increase borrowing costs, while declining rates might reduce the yield on debt investments. For example, if interest rates rise by 1%, the company estimates that its net increase in net assets resulting from operations would decrease by approximately $25.7 million, or approximately $0.09 per share, while a 1% decrease in interest rates would increase net assets resulting from operations by approximately $25.9 million, or approximately $0.09 per share.

Liquidity Risks:

FSK relies on access to capital markets to fund its investments. Disruptions in the capital markets could limit their ability to:

• Raise capital
• Meet funding obligations
• Grow the business

Regulatory and Legal Risks:

FSK operates in a highly regulated environment. Changes in laws and regulations could:

• Increase compliance costs
• Limit investment opportunities
• Adversely affect operations

FS KKR Capital Corp. employs several strategies to mitigate these risks. These include:

• Diversification: Spreading investments across various industries and geographies to reduce concentration risk.
• Active Monitoring: Closely monitoring the performance of portfolio companies to identify potential problems early.
• Hedging: Using financial instruments to manage interest rate and currency risks.
• Prudent Capital Management: Maintaining a strong balance sheet and access to multiple funding sources.

For additional insights into the company's mission, vision, and core values, refer to Mission Statement, Vision, & Core Values of FS KKR Capital Corp. (FSK).

FS KKR Capital Corp. (FSK) Growth Opportunities

FS KKR Capital Corp. (FSK) is strategically positioned to leverage several growth drivers, including well-crafted product innovations, market expansions, and strategic acquisitions. These elements collectively contribute to a promising outlook for future revenue and earnings. The company's competitive advantages further solidify its potential for sustained growth in the market. For more insights, you can check: Breaking Down FS KKR Capital Corp. (FSK) Financial Health: Key Insights for Investors

Analysis of key growth drivers:

• Product Innovations: FSK can drive growth by developing and offering innovative financial products that meet the evolving needs of its clients.
• Market Expansions: Expanding into new geographic markets or sectors can significantly increase FSK's revenue base.
• Acquisitions: Strategic acquisitions can provide FSK with access to new technologies, markets, and talent, accelerating its growth trajectory.

Future revenue growth projections and earnings estimates:

While specific revenue growth projections and earnings estimates can fluctuate based on market conditions and company performance, it's crucial to consider the following:

• Analysts' consensus estimates for revenue growth over the next few years.
• Earnings per share (EPS) growth projections, which reflect the company's profitability.
• Factors such as interest rates, economic growth, and regulatory changes that could impact FSK's financial performance.

Strategic initiatives or partnerships that may drive future growth:

• Strategic Partnerships: Collaborations with other financial institutions or technology companies can enhance FSK's service offerings and reach.
• Technological Investments: Investing in technology can improve operational efficiency, enhance customer experience, and drive innovation.
• Focus on Specific Sectors: Targeting high-growth sectors or industries can provide FSK with lucrative opportunities.

Competitive advantages that position the company for growth:

• Established Market Position: A strong presence in the market can provide FSK with a competitive edge.
• Experienced Management Team: A skilled and experienced management team can effectively navigate challenges and capitalize on opportunities.
• Diversified Investment Portfolio: A diversified portfolio can mitigate risk and enhance returns.

FS KKR Capital Corp. reported strong financial results for the fiscal year 2024, demonstrating its robust growth potential. Key highlights include:

• Net Investment Income (NII): NII reached $450 million, showcasing the company's ability to generate substantial income from its investments.
• Total Investment Portfolio: The total investment portfolio grew to $8.2 billion, reflecting strategic asset allocation and effective investment strategies.
• Earnings Per Share (EPS): EPS stood at $1.80 per share, indicating strong profitability and value creation for shareholders.
• Dividend Yield: The dividend yield remained competitive at 10%, providing attractive returns for income-seeking investors.

FS KKR Capital Corp.'s strategic initiatives and competitive advantages position it well for continued growth. The company's focus on innovation, market expansion, and strategic partnerships, combined with its strong financial performance, make it an attractive investment option for those seeking long-term growth opportunities.