Stock Analysis & Valuation NewtekOne, Inc. (NEWT)

• Previous Close: $13.49
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	32.38	140
Intrinsic value (DCF)	82.75	513
Graham-Dodd Method	21.24	57
Graham Formula	78.58	483

Strategic Investment Analysis

Company Overview

Newtek Business Services Corp. (NASDAQ: NEWT) is a leading financial and business services provider specializing in the small-and medium-sized business (SMB) market in the United States. Operating as a business development company (BDC), Newtek offers a comprehensive suite of services, including small business loans (SBA loans), electronic payment processing, managed technology solutions, and insurance products. The company focuses on first and second lien loans, unsecured loans, and accounts receivable financing, catering to SMBs seeking capital for commercial real estate, equipment, working capital, and acquisitions. Additionally, Newtek provides eCommerce solutions, cloud hosting, payroll management, and insurance services through its Newtek Advantage platform, a real-time operating system for business management. With strategic alliances with major institutions like AIG and Navy Federal Credit Union, Newtek serves as a one-stop financial and operational partner for SMBs. Headquartered in Boca Raton, Florida, with offices across key U.S. markets, Newtek plays a critical role in supporting SMB growth, a vital segment of the U.S. economy.

Investment Summary

Newtek Business Services presents an intriguing investment opportunity due to its diversified revenue streams and focus on the underserved SMB market. The company’s ability to generate steady income through loan origination, payment processing, and technology services provides resilience against economic fluctuations. However, risks include its high beta (1.32), indicating volatility relative to the market, and negative operating cash flow (-$153M in the latest period), which may raise concerns about liquidity. The dividend yield (~3.8% based on a $0.76 annual payout) is attractive but must be weighed against debt levels ($714.5M) and reliance on SBA lending, which is sensitive to regulatory changes. Investors should monitor loan portfolio performance and interest rate impacts on borrowing demand.

Competitive Analysis

Newtek’s competitive advantage lies in its vertically integrated model, combining lending with value-added services (payment processing, payroll, insurance), creating stickier client relationships. Unlike pure-play BDCs, Newtek’s diversified revenue reduces dependency on interest income. Its expertise in SBA lending (a government-backed program) provides a moat, as underwriting these loans requires specialized knowledge. However, competition is intense. Traditional banks (e.g., JPMorgan Chase) and fintech lenders (e.g., LendingClub) offer overlapping services with greater scale. Newtek’s smaller size limits its ability to compete on pricing but allows for niche specialization in SMBs overlooked by larger players. Technology integration (Newtek Advantage) differentiates it from legacy BDCs but lags behind fintech disruptors in user experience. Regulatory advantages (BDC structure) enable higher leverage but also impose compliance burdens. The company’s regional focus (NY, LA, FL) could be a strength (localized underwriting) or a weakness (geographic concentration risk).

Major Competitors

• Ares Capital Corporation (ARCC): Ares Capital is the largest BDC by assets, offering scale and diversified lending across middle-market companies. Its strengths include lower cost of capital and strong institutional backing, but it lacks Newtek’s integrated services model. Ares focuses on larger deals, reducing direct competition with Newtek’s SMB niche.
• Main Street Capital Corporation (MAIN): Main Street specializes in lower-middle-market debt and equity investments, similar to Newtek’s SMB focus. Its internally managed structure and consistent dividend history make it a strong competitor. However, Main Street does not offer the breadth of ancillary services (e.g., payment processing) that Newtek provides.
• LendingClub Corporation (LC): LendingClub’s fintech platform disrupts traditional SMB lending with faster digital underwriting. Its strengths include superior technology and lower overhead, but it lacks Newtek’s regulatory advantages as a BDC and does not provide holistic business services beyond lending.
• JPMorgan Chase & Co. (JPM): JPMorgan’s vast resources and SBA lending capabilities pose a threat to Newtek. Its strengths are brand recognition and low funding costs, but its bureaucratic structure limits agility in serving smaller SMBs, where Newtek’s specialized approach excels.
• PayPal Holdings, Inc. (PYPL): PayPal competes in payment processing and working capital loans for SMBs. Its global reach and seamless integration with eCommerce platforms are strengths, but it lacks Newtek’s in-person consulting and comprehensive financial services tailored to local businesses.