FIDUS INVESTMENT Corp (FDUS) stock intrinsic value fair value estimate & owner earnings analysis

Fidus Investment Corporation is an externally managed business development company. It lends to, and takes small equity stakes in, U.S. lower middle-market companies (revenue of $10 million to $150 million, EBITDA of $5 million to $30 million). At December 31, 2025 the portfolio was $1.32 billion at fair value: 77% first-lien debt (48% unitranche loans), 5% second lien, 7% subordinated debt and 11% equity, with a 12.6% weighted average yield on debt (13.3% a year earlier). The earnings that matter here are net investment income (NII), the interest, fees and dividends collected less interest, management fees and other costs. Because the company continually reinvests in loans, its operating cash flow swings with how much it lends (negative $147 million in 2025 on $498 million of new investments), so we use NII per share as owner earnings. There is no stock compensation and no capital spending to deduct. NII per share was $1.62 (2020), $1.03 (2021), $1.90 (2022), $2.47 (2023), $2.29 (2024) and $2.08 (2025). We set 2021 aside because a $19.9 million incentive fee accrued on that year's large investment gains; those gains raised net assets but not NII. Our anchor uses 2022 to 2025, the period since the current rate regime and the larger balance sheet: median $2.19. NII per share fell 9% in 2025 even though total NII was steady at $73.9 million: 2025 portfolio yields fell, interest and financing costs rose $7.2 million, and the share count grew from about 32.6 million to 35.5 million (weighted). Second-quarter 2026 NII was about flat with a year earlier while shares outstanding were roughly 8% higher, so per-share income appears to be still drifting lower. Because the trailing decline was 9%, our base case begins at $1.90, below both the anchor and 2025, rather than assuming a rebound. Base case ($27.14 per share): NII of $1.90 in the first year, then a gradual 1% annual decline. Growth is deliberately not credited. Adding loans funded by new shares and debt has not raised per-share income (2023 to 2025: $2.47 to $2.08), and rate moves and share gains are not something we can name and evidence. What we do credit is the durable part: a lending franchise that has run since 2011, holds SBIC licenses (SBA debentures of $237.5 million), distributes nearly all income, and has kept net asset value per share stable to higher (it was $19.55 at December 31, 2025, versus $15.32 at the end of 2012), so we let income persist rather than fade to zero, with a small decline for yield compression and credit slippage. Bear case ($17.78): NII falls to $1.60 and then declines 3% a year indefinitely. The named pressures are visible in the filing: yield already down 0.7 point in a year; four loans on non-accrual at the end of 2024 (cost $44.4 million) and two at the end of 2025 (cost $27.1 million, worth $1.7 million); 2025 realized losses including $14.4 million on Quantum IR Technologies and $5.2 million on US GreenFiber; and leverage of roughly $658 million of borrowings against $741.9 million of net assets, including $125 million of notes maturing in November 2026 and $200 million of 6.75% notes due March 2030. Leverage magnifies losses (the company's own table shows a 10% portfolio loss becoming a 24% loss for shareholders), so the bear case assumes losses persistently exceed gains, shrinking the income base. No debt is deducted from any case; interest is already inside NII. Bull case ($34.67): NII holds at the 2025 level of $2.08 with no further decline, because portfolio growth and fee income (fee income rose to $12.2 million in 2025 from $9.6 million) offset lower yields, and credit stays clean as it did with only $10.3 million of non-accrual fair value at end 2024. We did not credit a return to 2023's $2.47, since that year reflected higher short-term rates and a smaller share count. What would make this wrong: a recession that pushes the 8% of the portfolio rated 3 or worse (fair value $111 million at end 2025) into non-accrual and realized losses; sharply lower short-term rates, since roughly three-quarters of debt investments were floating rate at end 2024; or further share issuance that dilutes per-share income. Book value per share of $19.55 is a useful reference point; our base value sits well above it because the business has earned about 10% on book value, well above the 6% required return, but that spread is only worth paying for while credit performance holds. The margin-of-safety price sits just below the bear case and book value, reflecting leverage, credit risk in small private borrowers and the fact that per-share income has been falling.