Bank of America Securities analyst Derek Hewett maintained a Buy rating on Ares Capital (ARCC – Research Report) yesterday and set a price target of $22.00.
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Derek Hewett has given his Buy rating due to a combination of factors including Ares Capital’s strong fundamentals and portfolio growth. Despite some yield pressure affecting top-line growth, the company demonstrated robust credit quality and an impressive record NAV/share of $19.89. The company’s profitability remains solid with a core/GAAP ROE of 11%, and non-accruals are significantly below the long-term average, indicating strong capital deployment.
Ares Capital’s portfolio increased by 3% to $26.7 billion with stable leverage, despite a slight decline in yield from 11.7% to 11.1%. The company’s ability to raise capital accretively and maintain a stable dividend yield of 9.7% on NAV supports its valuation. Moreover, the credit profile remains resilient, with a modest increase in non-accruals, which is still below peer averages, further supporting Derek Hewett’s confidence in Ares Capital’s capacity to deliver risk-adjusted returns in the current economic environment.
In another report released yesterday, Truist Financial also maintained a Buy rating on the stock with a $25.00 price target.