Analyzing Ares Capital Corporation (ARCC) and Its Competitors

Ares Capital Corporation (NASDAQ: ARCC) is one of 558 public companies in the “Closed End Funds” industry, but how does it contrast to its competitors? We will compare Ares Capital Corporation to similar businesses based on the strength of its profitability, institutional ownership, analyst recommendations, dividends, earnings, valuation and risk.

Profitability

This table compares Ares Capital Corporation and its competitors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ares Capital Corporation 45.78% 8.60% 4.95%
Ares Capital Corporation Competitors -35.24% 6.99% 5.45%

Risk & Volatility

Ares Capital Corporation has a beta of 0.63, meaning that its stock price is 37% less volatile than the S&P 500. Comparatively, Ares Capital Corporation’s competitors have a beta of 0.56, meaning that their average stock price is 44% less volatile than the S&P 500.

Insider & Institutional Ownership

44.8% of Ares Capital Corporation shares are held by institutional investors. Comparatively, 23.8% of shares of all “Closed End Funds” companies are held by institutional investors. 0.5% of Ares Capital Corporation shares are held by company insiders. Comparatively, 5.1% of shares of all “Closed End Funds” companies are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings for Ares Capital Corporation and its competitors, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Capital Corporation 0 2 8 0 2.80
Ares Capital Corporation Competitors 233 1561 1913 31 2.47

Ares Capital Corporation currently has a consensus price target of $18.06, indicating a potential upside of 11.36%. As a group, “Closed End Funds” companies have a potential upside of 48.34%. Given Ares Capital Corporation’s competitors higher possible upside, analysts plainly believe Ares Capital Corporation has less favorable growth aspects than its competitors.

Valuation and Earnings

This table compares Ares Capital Corporation and its competitors gross revenue, earnings per share (EPS) and valuation.

Gross Revenue NetIncome Price/Earnings Ratio
Ares Capital Corporation $1.01 billion $474.00 million 12.77
Ares Capital Corporation Competitors $238.79 million $43.51 million 272.68

Ares Capital Corporation has higher revenue and earnings than its competitors. Ares Capital Corporation is trading at a lower price-to-earnings ratio than its competitors, indicating that it is currently more affordable than other companies in its industry.

Dividends

Ares Capital Corporation pays an annual dividend of $1.52 per share and has a dividend yield of 9.4%. Ares Capital Corporation pays out 119.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. As a group, “Closed End Funds” companies pay a dividend yield of 8.7% and pay out 97.5% of their earnings in the form of a dividend.

Summary

Ares Capital Corporation beats its competitors on 9 of the 15 factors compared.

Ares Capital Corporation Company Profile

Ares Capital Corporation is a specialty finance company. The Company operates as a closed-end, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests primarily in the United States middle-market companies. It may from time to time invest in larger or smaller (in particular, for investments in early-stage and/or venture capital-backed) companies. It invests primarily in first lien senior secured loans (including unitranche loans, which are loans that combine both senior and mezzanine debt, generally in a first lien position), second lien senior secured loans, and mezzanine debt, which in some cases includes an equity component. It invests in various industries, such as automotive services, business services, consumer products, and containers and packaging. Ares Capital Management LLC serves as its investment advisor.

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