Does Main Street Capital’s 2025 Valuation Reflect Its Strong Multi Year Share Price Gains?

• If you have ever looked at Main Street Capital and wondered whether the current price really reflects its underlying value, this breakdown is for you.
• The stock has climbed to around $62.05, delivering about 2.2% over the last week, 4.9% in the last month, 4.7% year to date, and 19.9% over the past year, with multi year gains of 114.1% over 3 years and 190.8% over 5 years reshaping how investors see its potential.
• Recent headlines have focused on Main Street Capital expanding its portfolio of lower middle market investments and continuing to originate new deals, reinforcing its image as a steady income and growth play. At the same time, market commentary has highlighted the resilience of business development companies in a higher for longer rate environment, which helps explain why investors have been willing to bid the shares higher.
• On our valuation checks, Main Street Capital scores a 3 out of 6, suggesting it looks undervalued on some metrics but not all. Next we will unpack those methods in detail and point you to another way to think about valuation by the end of this article.

Main Street Capital delivered 19.9% returns over the last year. See how this stacks up to the rest of the Capital Markets industry.

Approach 1: Main Street Capital Excess Returns Analysis

The Excess Returns model looks at how effectively Main Street Capital turns shareholder equity into profits after covering the cost of that equity. In simple terms, it asks whether each dollar invested in the business is earning more than investors require as compensation for risk.

For Main Street Capital, book value sits at $32.78 per share, with a stable earnings per share estimate of $4.69, based on forward return on equity forecasts from 7 analysts. The average return on equity is 13.56%, while the cost of equity is estimated at $3.15 per share, leaving an excess return of $1.54 per share. Over time, this is projected to lift stable book value to about $34.57 per share, supported by analyst book value estimates.

Using these inputs, the Excess Returns framework produces an intrinsic value of roughly $60.82 per share. With the stock trading around $62.05, the model suggests Main Street Capital is about 2.0% overvalued, effectively in line with its estimated fair value.

Result: ABOUT RIGHT

Main Street Capital is fairly valued according to our Excess Returns, but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Main Street Capital.

Approach 2: Main Street Capital Price vs Earnings

For profitable companies like Main Street Capital, the price to earnings, or PE, ratio is a useful way to gauge how much investors are willing to pay for each dollar of earnings. A higher PE often reflects expectations of faster growth or lower perceived risk, while a lower PE can signal slower growth, higher risk, or a potential bargain if the market is too pessimistic.

Main Street Capital currently trades on a PE of about 10.36x. That sits well below the broader Capital Markets industry average of roughly 25.35x and also below the 16.28x average for its peer group. This suggests the market is assigning it a discount. However, simple comparisons to industry and peers can be misleading because they ignore differences in growth prospects, profitability, size, and risk.

To address this, Simply Wall St calculates a proprietary Fair Ratio, which estimates what PE multiple a stock should trade at after factoring in its earnings growth outlook, profit margins, risk profile, industry and market cap. For Main Street Capital, this Fair Ratio is 10.92x, only slightly above the current 10.36x. That implies the stock is trading very close to where you might expect based on its fundamentals and risk return profile.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1448 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Main Street Capital Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, an easy tool on Simply Wall St's Community page where millions of investors connect a company’s story to a specific forecast and fair value estimate by writing down their assumptions for future revenue, earnings and margins. They can then compare that Fair Value to today’s price to decide whether to buy, hold or sell. The Narrative itself automatically updates as new news or earnings come in. This means that one Main Street Capital investor might build a cautious Narrative around analysts’ consensus fair value of about $50.40 and a softer growth outlook, while another more optimistic investor could anchor their Narrative closer to the upper target of roughly $52 and a stronger long term dividend and NAV compounding. Each investor can clearly see how their own story flows into forecast numbers and then into a concrete valuation they can act on.

Do you think there's more to the story for Main Street Capital? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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