Critical Contrast: Ares Capital Corporation (ARCC) versus Its Competitors

Ares Capital Corporation (NASDAQ: ARCC) is one of 575 publicly-traded companies in the “Closed End Funds” industry, but how does it compare to its competitors? We will compare Ares Capital Corporation to similar companies based on the strength of its dividends, analyst recommendations, valuation, institutional ownership, earnings, risk and profitability.

Analyst Ratings

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Capital Corporation 0 2 9 0 2.82
Ares Capital Corporation Competitors 192 1188 1413 14 2.44

Ares Capital Corporation presently has a consensus price target of $17.89, suggesting a potential upside of 7.89%. As a group, “Closed End Funds” companies have a potential upside of 40.83%. Given Ares Capital Corporation’s competitors higher possible upside, analysts plainly believe Ares Capital Corporation has less favorable growth aspects than its competitors.

Earnings & Valuation

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

Gross Revenue EBITDA Price/Earnings Ratio
Ares Capital Corporation N/A N/A 12.85
Ares Capital Corporation Competitors $57.58 million $38.86 million -0.16

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

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 44.61% 8.95% 5.13%
Ares Capital Corporation Competitors -49.41% 6.60% 5.17%

Dividends

Ares Capital Corporation pays an annual dividend of $1.52 per share and has a dividend yield of 9.2%. Ares Capital Corporation pays out 117.8% 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 87.0% of their earnings in the form of a dividend.

Institutional and Insider Ownership

45.0% of Ares Capital Corporation shares are owned by institutional investors. Comparatively, 23.2% of shares of all “Closed End Funds” companies are owned by institutional investors. 0.5% of Ares Capital Corporation shares are owned by company insiders. Comparatively, 4.5% of shares of all “Closed End Funds” companies are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Ares Capital Corporation has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500. Comparatively, Ares Capital Corporation’s competitors have a beta of 0.55, meaning that their average share price is 45% less volatile than the S&P 500.

Summary

Ares Capital Corporation beats its competitors on 8 of the 14 factors compared.

About Ares Capital Corporation

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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