Runway Growth Finance Corp. (RWAY) | Investment Case

1. Company Snapshot

1.a. Company Description

Runway Growth Finance Corp.is a business development company specializing investments in senior-secured loans to late stage and growth companies.It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors.

It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services.It invests in senior secured loans between $10 million and $75 million.

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1.b. Last Insights on RWAY

Runway Growth Finance Corp.'s recent performance was driven by a strong fourth quarter portfolio update, which highlighted a diversified investment portfolio of $1.1 billion across 52 companies, primarily in the tech sector. The company's total and net investment income of $36.7 million and $15.9 million, respectively, demonstrate its ability to generate revenue. Additionally, the announcement of a fourth quarter regular dividend of $0.40 per share and a recent adviser merger with BC Partners suggest a positive outlook for growth.

1.c. Company Highlights

Last Price	9.16
Change Percentage	-0.54%
Open	9.24
Previous Close	9.21
Market Cap ( Millions)	331
Volume	365402
Year High	11.73
Year Low	8.35
M A 50	9.72
M A 200	10.21

FCF Yield	32.25%
Dividend Yield	15.28%
ROE	12.08%
Debt / Equity	0.00%
Net Debt / EBIDTA	-9.35%
Price To Book	0.68
Price Earnings Ratio	5.47
Price To FCF	3.1
Price To sales	2.0
EV / EBITDA	3.81

2. Runway Growth Finance's Q3 2025 Earnings: A Closer Look

Runway Growth Finance reported total investment income of $36.7 million and net investment income of $15.7 million for the third quarter of 2025. The company's earnings per share (EPS) came in at $0.43, beating analyst estimates of $0.38. The total investment portfolio had a fair value of $946 million, a decrease of 7.7% from $1.02 billion in the second quarter of 2025. The NAV per share was $13.55, a decrease of 1.9% compared to $13.66 at the end of the second quarter of 2025.

Publication Date: Nov -29

                                    📋 Highlights
                                    Total Investment Income & NII:
                                                Q3 2025 reported $36.7 million investment income and $15.7 million net investment income (NII).
SWK Merger Agreement:
                                                $242 million acquisition of SWK Holdings to scale portfolio, accelerate growth, and generate mid-single-digit NII accretion.
Portfolio Valuation Decline:
                                                Fair value dropped 7.7% to $946 million from $1.02 billion Q2 2025, driven by warrant expirations and IPO liquidations.
Leverage & Liquidity:
                                                Leverage ratio at 0.92x, asset coverage 2.09x, with $371.9 million liquidity and $364 million borrowing capacity.
Merger Accretion & Timeline:
                                                SWK merger expected to be accretive in 2026, with shares issued based on NAV per share and OID benefits over time.

                                

Investment Activity and Portfolio Performance

Runway completed 11 investments in new and existing portfolio companies across technology, healthcare, and select consumer sectors, representing $128.3 million in funded loans. The weighted average portfolio risk rating increased to 2.42, and the dollar-weighted loan-to-value ratio increased from 29.6% to 31.4%. Prepayment activity is driven by M&A remaining active across portfolio companies and some companies outgrowing the cost of capital, finding refinancing options with cheaper alternatives.

Merger with SWK Holdings

Runway recently announced a definitive merger agreement to acquire SWK Holdings, a specialty finance company focused on healthcare and life sciences, for an estimated $242 million. The acquisition is expected to immediately scale Runway's portfolio, accelerate growth and diversification, and enhance earnings power and financial profile. The transaction is anticipated to generate mid-single-digit run-rate net investment income accretion and support modest ROE expansion.

Valuation and Dividend

The company's P/E Ratio is 5.49, and the Dividend Yield is 15.23%. The declared dividend of $0.33 per share reflects the company's earnings power and anticipation of prepayments. With a ROE of 12.08%, the company's profitability is evident. The merger is expected to be accretive in 2026, with potential for OID accretion over time.

Outlook and Growth Prospects

The BC Partners ecosystem is driving increased sourcing, with a good split between legacy pipeline and new opportunities. The company expects a normal course of prepayments to occur. Analysts estimate next year's revenue growth at 3.8%. The SWK team will join for transition services to move the portfolio onto the BDC's platform, assisting with portfolio relationships and new originations.

3. NewsRoom

Runway Growth Finance: 14% Dividend Yield, 30% Discount To NAV - I'm Not Buying

Nov -20

Source: seekingalpha.com

Dividend Power Dogs: 12 Ideal Safer November Stars

Nov -16

Source: seekingalpha.com

Yield Hunting Part 36: Runway Growth Finance And Close To 8% From RWAYL

Nov -12

Source: seekingalpha.com

Zacks Industry Outlook Ares Capital, Hercules Capital and Runway Growth Finance (Revised)

Nov -12

Source: zacks.com

Zacks Industry Outlook Ares Capital, Hercules and Runway Growth Finance

Nov -11

Source: zacks.com

3 SBIC & Commercial Finance Stocks to Watch Despite Industry Concerns

Nov -10

Source: zacks.com

Runway Growth Finance Corp. (RWAY) Q3 2025 Earnings Call Transcript

Nov -07

Source: seekingalpha.com

Runway Growth Finance Corp. (RWAY) Reports Q3 Earnings: What Key Metrics Have to Say

Nov -07

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.98%)

6. Segments

Lending and Investment

Expected Growth: 10.98%

Runway Growth Finance Corp.'s 10.98% growth in Lending and Investment is driven by increasing demand for venture debt, expansion into new markets, and strategic partnerships. Additionally, the company's expertise in providing customized financing solutions and its ability to navigate complex credit structures have contributed to its growth.

7. Detailed Products

Venture Debt Financing

Provides flexible and non-dilutive capital to venture-backed companies, allowing them to extend their runway and achieve key milestones.

Growth Capital

Offers flexible, non-dilutive capital to support growth initiatives, such as hiring, marketing, and product development.

Acquisition Financing

Provides financing for acquisitions, recapitalizations, and refinancings, enabling companies to execute strategic transactions.

Working Capital Financing

Offers financing solutions to support working capital needs, such as inventory financing, accounts receivable financing, and more.

CapEx Financing

Provides financing for capital expenditures, such as equipment purchases, technology upgrades, and other strategic investments.

8. Runway Growth Finance Corp.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Runway Growth Finance Corp. is moderate, as there are some alternative financing options available to customers, but they are not highly attractive or widely available.

Bargaining Power Of Customers

The bargaining power of customers is low, as they have limited negotiating power and are not highly concentrated.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate, as they have some negotiating power, but are not highly concentrated and do not have a high level of differentiation.

Threat Of New Entrants

The threat of new entrants is high, as the barriers to entry are relatively low, and there are many potential entrants in the market.

Intensity Of Rivalry

The intensity of rivalry is high, as there are many competitors in the market, and the market is highly competitive.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	48.25%
Debt Cost	3.95%
Equity Weight	51.75%
Equity Cost	6.86%
WACC	5.45%
Leverage	93.24%

11. Quality Control: Runway Growth Finance Corp. passed 2 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Runway Growth Finance

A-Score: 7.7/10

Value: 7.5

Growth: 8.3

Quality: 7.0

Yield: 10.0

Momentum: 4.0

Volatility: 9.3

1-Year Total Return ->

Medallion Financial

A-Score: 7.0/10

Value: 8.9

Growth: 7.7

Quality: 5.6

Yield: 7.0

Momentum: 7.0

Volatility: 6.0

1-Year Total Return ->

Barings BDC

A-Score: 6.8/10

Value: 6.4

Growth: 5.1

Quality: 6.3

Yield: 10.0

Momentum: 3.0

Volatility: 10.0

1-Year Total Return ->

Navient

A-Score: 6.3/10

Value: 9.6

Growth: 5.0

Quality: 5.6

Yield: 8.0

Momentum: 3.0

Volatility: 6.3

1-Year Total Return ->

Farmer Mac

A-Score: 6.1/10

Value: 6.2

Growth: 8.3

Quality: 4.6

Yield: 7.0

Momentum: 3.0

Volatility: 7.7

1-Year Total Return ->

Oaktree Specialty Lending

A-Score: 5.8/10

Value: 5.6

Growth: 2.7

Quality: 5.5

Yield: 10.0

Momentum: 1.5

Volatility: 9.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-5.79%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.45%

Runway Growth Finance Corp. - US78163D1000

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on RWAY

1.c. Company Highlights

Higher Yield

Average Growth

Average Quality

Revenues Miss

Medium Volatility

Stable Momentum

Weak Momentum

Earnings Miss

Revenues Beats

Cheaper

Higher Growth

Better Quality

Earnings Beats

Fairly Valued

Less Volatile

2. Runway Growth Finance's Q3 2025 Earnings: A Closer Look

Investment Activity and Portfolio Performance

Merger with SWK Holdings

Valuation and Dividend

Outlook and Growth Prospects

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.98%)

6. Segments

Lending and Investment

Expected Growth: 10.98%

7. Detailed Products

Venture Debt Financing

Growth Capital

Acquisition Financing

Working Capital Financing

CapEx Financing

8. Runway Growth Finance Corp.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Runway Growth Finance Corp. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

9.16$

Current Price

9.16$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA