Over the last six months, Sixth Street Specialty Lending’s shares have sunk to $21.95, producing a disappointing 7.7% loss - a stark contrast to the S&P 500’s 10% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Sixth Street Specialty Lending, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Sixth Street Specialty Lending Will Underperform?
Even with the cheaper entry price, we're sitting this one out for now. Here are two reasons you should be careful with TSLX and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, market returns, and industry trends. Sixth Street Specialty Lending’s recent performance shows its demand has slowed as its annualized revenue growth of 5.3% over the last two years was below its five-year trend. 
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.
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sixth Street Specialty Lending’s EPS grew at a weak 1% compounded annual growth rate over the last five years, lower than its 11.1% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
We see the value of companies driving economic growth, but in the case of Sixth Street Specialty Lending, we’re out. After the recent drawdown, the stock trades at 11× forward P/E (or $21.95 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Would Buy Instead of Sixth Street Specialty Lending
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