Main Street Capital (MAIN)
We aren’t fans of Main Street Capital. Its decelerating revenue growth and even worse EPS performance give us little confidence it can beat the market.― StockStory Analyst Team
1. News
2. Summary
Why Main Street Capital Is Not Exciting
With a focus on building long-term partnerships rather than quick transactions, Main Street Capital (NYSE:MAIN) is a business development company that provides long-term debt and equity capital to lower middle market and middle market companies.
- One positive is that its annual revenue growth of 20.5% over the past five years was outstanding, reflecting market share gains this cycle
Main Street Capital is in the doghouse. We see more attractive opportunities in the market.
Why There Are Better Opportunities Than Main Street Capital
Main Street Capital’s stock price of $60.08 implies a valuation ratio of 15.2x forward P/E. This multiple rich for the business quality. Not a great combination.
It’s better to pay up for high-quality businesses with strong long-term earnings potential rather than to buy lower-quality companies with open questions and big downside risks.
3. Main Street Capital (MAIN) Research Report: Q3 CY2025 Update
Business development company Main Street Capital (NYSE:MAIN) met Wall Streets revenue expectations in Q3 CY2025, with sales up 2.2% year on year to $139.8 million. Its non-GAAP profit of $1.03 per share was 5.2% above analysts’ consensus estimates.
Main Street Capital (MAIN) Q3 CY2025 Highlights:
Company Overview
With a focus on building long-term partnerships rather than quick transactions, Main Street Capital (NYSE:MAIN) is a business development company that provides long-term debt and equity capital to lower middle market and middle market companies.
Main Street Capital operates with a distinctive two-tier investment approach. For lower middle market companies (those with annual revenues between $10 million and $150 million), it typically provides both debt and equity financing, often taking a significant minority ownership position. This allows Main Street to participate in the growth of these businesses while collecting interest payments. For middle market companies (generally larger businesses with revenues above $150 million), Main Street primarily offers debt investments with some selective equity opportunities.
The company generates revenue through multiple streams: interest income from debt investments, dividend income from equity investments, and capital appreciation when portfolio companies are sold or go public. Main Street's investment professionals conduct thorough due diligence before investing, analyzing factors like management quality, competitive position, and growth potential.
A manufacturing company seeking expansion capital might receive a $15 million investment from Main Street, structured as $10 million in debt and $5 million in equity. This allows the manufacturer to build a new production facility while Main Street earns interest on the loan and participates in future growth through its equity stake.
Unlike many competitors, Main Street employs an internally managed structure, meaning its management team works directly for the company rather than through an external advisory firm. This approach can reduce conflicts of interest and align management incentives with shareholder returns. The company maintains offices in several U.S. cities to source deals across the country and provides not just capital but also strategic guidance to its portfolio companies.
4. Specialty Finance
Specialty finance companies provide targeted lending or financial services for specific industries or needs. They benefit from expertise in particular sectors, often reduced competition in specialized niches, and tailored underwriting that can yield higher margins. Challenges include concentration risk in specific industries, difficulty achieving scale efficiencies, and potential vulnerability during sector-specific downturns affecting their specialized markets.
Main Street Capital competes with other business development companies like Ares Capital Corporation (NASDAQ:ARCC), FS KKR Capital Corp. (NYSE:FSK), and Blackstone Secured Lending Fund (NYSE:BXSL), as well as private equity firms, commercial banks, and investment banks that provide capital to middle market companies.
5. Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Main Street Capital’s 20.5% annualized revenue growth over the last five years was excellent. Its growth beat the average financials company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Main Street Capital’s annualized revenue growth of 7.6% over the last two years is below its five-year trend, but we still think the results were respectable. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
This quarter, Main Street Capital grew its revenue by 2.2% year on year, and its $139.8 million of revenue was in line with Wall Street’s estimates.
6. Pre-Tax Profit Margin
Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Specialty Finance companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.
The pre-tax profit margin includes interest because it's central to how financial institutions generate revenue and manage costs. Tax considerations are excluded since they represent government policy rather than operational performance, giving investors a clearer view of business fundamentals.
Over the last four years, Main Street Capital’s pre-tax profit margin has risen by 34.8 percentage points, going from 126% to 91%. Luckily, it seems the company has recently taken steps to address its expense base as its pre-tax profit margin expanded by 3.4 percentage points on a two-year basis.
Main Street Capital’s pre-tax profit margin came in at 64% this quarter. This result was 35.2 percentage points worse than the same quarter last year.
7. Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Main Street Capital’s EPS grew at a solid 13.7% compounded annual growth rate over the last five years. However, this performance was lower than its 20.5% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Main Street Capital, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.
In Q3, Main Street Capital reported adjusted EPS of $1.03, up from $1 in the same quarter last year. This print beat analysts’ estimates by 5.2%. Over the next 12 months, Wall Street expects Main Street Capital’s full-year EPS of $4.05 to shrink by 2.6%.
8. Tangible Book Value Per Share (TBVPS)
The balance sheet drives profitability for financial firms since earnings flow from managing diverse assets and liabilities across multiple business lines. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential across their varied operations.
This is why we consider tangible book value per share (TBVPS) an important metric for the sector. TBVPS represents the real net worth per share across all business segments, providing a clear measure of shareholder equity regardless of the complexity of operations. On the other hand, EPS is often distorted by the diverse nature of operations, mergers, and various accounting treatments across different business units. Book value provides clearer performance insights.
Main Street Capital’s TBVPS grew at a decent 8.8% annual clip over the last five years. However, TBVPS growth has recently decelerated a bit to 7.5% annual growth over the last two years (from $28.33 to $32.74 per share).
9. Return on Equity
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, Main Street Capital has averaged an ROE of 17.8%, impressive for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This is a bright spot for Main Street Capital.
10. Balance Sheet Assessment
The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.
If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.
Main Street Capital has no debt, so leverage is not an issue here.
11. Key Takeaways from Main Street Capital’s Q3 Results
It was good to see Main Street Capital beat analysts’ EPS expectations this quarter. The stock remained flat at $57.29 immediately after reporting.
12. Is Now The Time To Buy Main Street Capital?
Updated: December 4, 2025 at 11:38 PM EST
Before making an investment decision, investors should account for Main Street Capital’s business fundamentals and valuation in addition to what happened in the latest quarter.
Main Street Capital isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its TBVPS growth was good over the last five years
Main Street Capital’s P/E ratio based on the next 12 months is 15.2x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now.
Wall Street analysts have a consensus one-year price target of $60.67 on the company (compared to the current share price of $60.08).