GECC

We rate Great Elm Capital Corp. (GECC) as Avoid with a composite score of 34.1/100 at a current price of $6.29. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in investment (47th percentile) and value (47th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (11th percentile) and quality (35th percentile) tempers our overall conviction. We assign a No Moat rating (25/100), High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Great Elm Capital Corp. holds a lower-quartile position (#34 of 38) within the Financial sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 34.1/100 places it at rank #4197 in our full 7,333-stock universe. At $116M in market capitalization, Great Elm Capital Corp. is a small-cap player in the Financial space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -72% combined with momentum at the 11th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

Available margin data shows operating margins of -41%. Incomplete margin data limits our ability to fully assess the cost structure and margin trajectory, though the available metrics provide a partial view of operating efficiency.

At a current price of $6.29, Great Elm Capital Corp. is trading near fair value based on current fundamentals. Our value factor score of 47/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at EV/EBITDA of 78.5x (at a premium), P/B of 0.7x, P/S of 2.8x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a High uncertainty rating to Great Elm Capital Corp.. Key risk factors include significant leverage (200% debt-to-equity), current negative profitability (net margin -148.6%), below-average price stability (37th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (200% debt-to-equity); current negative profitability (net margin -148.6%); below-average price stability (37th percentile); low beta of 0.23 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 37th percentile and quality factor at the 35th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: a 15.07% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Great Elm Capital Corp.'s capital allocation as Poor. Key concerns include low returns on equity (-4.5%), elevated leverage (200% D/E), negative profitability, weak asset returns (ROA -1.5%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Great Elm Capital Corp. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Great Elm Capital Corp. receives a Avoid rating with a composite score of 34.1/100 (rank #4197 of 7,333). Our quantitative framework assigns a No Moat (25/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 35/100.

Our analysis does not support a constructive view on Great Elm Capital Corp. at this time. The combination of limited competitive advantages, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.