Ares Commercial (ACRE) AI Stock Analysis

• Market Cap: $242.02M
• Dividend Yield: 17.7%
• Average Volume (3M): 431.55K
• Price to Earnings (P/E): ―
• Beta (1Y): 1.05
• Revenue Growth: -27.60%
• EPS Growth: 62.75%
• Country: US
• Employees: 1,200
• Sector: Real Estate
• Sector Strength: 48
• Industry: REIT - Mortgage
• EPS (TTM): -0.51
• Shares Outstanding: 55,005,352
• 10 Day Avg. Volume: 604,284
• 30 Day Avg. Volume: 431,551
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 4.36
• Enterprise Value/Revenue: 50.25
• Enterprise Value/Gross Profit: 75.66
• Enterprise Value/Ebitda: 144.56
• 1Y Price Target: $4.25
• Price Target Upside: -6.18% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 4

• Rating: 48 Neutral
• Price Target: ―

Ares Commercial Real Estate faces significant profitability challenges and negative momentum. While strong efforts in reducing risk and improving liquidity are positives, the negative earnings, high-risk loans, and recent dividend cut are notable risks. The high dividend yield may offer some appeal, but overall, the stock presents a cautious investment outlook.

Positive Factors

Earnings

ACRE reported distributable earnings per share of $0.13, surpassing the $0.10 estimate.

Liquidity

ACRE made progress on their goals of increasing liquidity and reducing leverage.

Negative Factors

Book Value

Book value declined 4% to $9.90 from $10.34 last quarter.

Dividend

ACRE reduced their dividend by 40% to $0.15 per quarter.

Valuation

An Underweight rating is reiterated as there is perceived better value elsewhere.

Ares Commercial Business Overview & Revenue Model

Company Description

Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate (CRE) loans and related investments in the United States. The company provides a range of financing solutions for the owners, operators, and sponsors of CRE properties. It originates senior mortgage loans, subordinate debt products, mezzanine loans, real estate preferred equity investments, and other CRE investments, including commercial mortgage backed securities. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. Ares Commercial Real Estate Management LLC operates as the manager of the company. The company was incorporated in 2011 and is based in New York, New York.

How the Company Makes Money

Ares Commercial Real Estate Corporation generates revenue primarily through interest income from its portfolio of commercial real estate loans. The company invests in and originates senior mortgage loans, which are secured by commercial properties and provide a steady stream of interest payments. Additionally, ACRE may generate income through fees associated with loan origination and management. The company focuses on maintaining a diversified portfolio across different property types and geographical locations to mitigate risk and enhance returns. ACRE's alignment with Ares Management Corporation provides access to a broad network of industry relationships and expertise, which supports deal sourcing and investment opportunities.

Ares Commercial Financial Statement Overview

Summary

Ares Commercial shows a volatile income statement with fluctuating revenues and profit margins. Despite a strong revenue position, the net profit margin is negative due to significant net losses. The balance sheet is mixed, with no debt but declining equity. Cash flow is stable but overshadowed by profitability concerns.

Income Statement

Ares Commercial shows a volatile income statement with fluctuating revenues and profit margins. While the revenue increased in 2024 compared to 2023, the net profit margin is negative due to significant net losses. The gross profit margin is strong as it matches total revenue, but the negative net income is concerning.

Balance Sheet

The balance sheet reflects a stable equity position with a debt-free status in 2024, which is positive. However, the significant decrease in stockholders' equity over recent years poses a risk. The equity ratio remains relatively healthy, indicating a decent asset coverage by equity.

Cash Flow

Ares Commercial demonstrates stable operating cash flow, albeit with a decreasing trend. Free cash flow remains positive, which is a strength. However, the company's negative net income affects the cash flow to net income ratios, highlighting potential profitability issues.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	21.01M	-15.23M	1.10M	109.05M	102.07M	78.69M
Gross Profit	13.95M	-15.23M	-93.24M	56.48M	83.51M	40.38M
EBITDA	7.30M	0.00	0.00	95.22M	61.18M	0.00
Net Income	-18.23M	-34.99M	-38.87M	29.79M	60.46M	21.84M
Balance Sheet
Total Assets	1.44B	1.75B	2.28B	2.52B	2.63B	1.93B
Cash, Cash Equivalents and Short-Term Investments	97.79M	72.48M	110.46M	2.41B	50.62M	74.78M
Total Debt	0.00	1.17B	1.62B	1.74B	1.08B	1.33B
Total Liabilities	914.94M	1.21B	1.65B	1.78B	1.95B	1.46B
Stockholders Equity	523.70M	540.13M	625.85M	747.54M	678.63M	473.01M
Cash Flow
Free Cash Flow	28.04M	35.55M	46.79M	57.16M	48.21M	31.49M
Operating Cash Flow	28.39M	35.55M	46.79M	57.16M	48.35M	31.76M
Investing Cash Flow	619.19M	427.91M	127.46M	193.17M	-699.68M	-81.87M
Financing Cash Flow	-624.10M	-507.63M	-205.07M	-159.67M	627.17M	119.25M

Ares Commercial Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 4.53
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ACRE, the sentiment is Positive. The current price of 4.53 is above the 20-day moving average (MA) of 4.45, below the 50-day MA of 4.63, and below the 200-day MA of 4.97, indicating a neutral trend. The MACD of -0.08 indicates Negative momentum. The RSI at 51.46 is Neutral, neither overbought nor oversold. The STOCH value of 61.89 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ACRE.

Ares Commercial Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MITT	67 Neutral	$234.82M	8.57	8.66%	10.53%	22.45%	-44.01%
SEVN	66 Neutral	$159.90M	10.27	5.71%	12.43%	-16.74%	-32.89%
NREF	61 Neutral	$259.09M	5.96	21.74%	14.12%	25.17%	―
AOMR	57 Neutral	$217.93M	5.93	14.91%	13.42%	75.08%	-21.03%
EARN	56 Neutral	$212.59M	20.12	-2.82%	16.93%	373.24%	-143.31%
Sector *	53 Neutral	$1.23B	2.72	-2.60%	5.66%	-2.15%	-149.23%
ACRE	48 Neutral	$242.02M	―	-3.30%	17.70%	-27.60%	62.75%

Ares Commercial Corporate Events

Ares Commercial Real Estate Cuts Dividend Amid Losses

Ares Commercial Real Estate Corporation reported a GAAP net loss of $10.7 million for the fourth quarter of 2024 and $35.0 million for the full year. In response to the financial results and a more flexible balance sheet, the company has reduced its quarterly dividend to $0.15 per share for the first quarter of 2025. Additionally, the company has improved its liquidity position by collecting $166 million in repayments, increasing available capital to over $200 million. This increase is intended to enhance the company’s ability to address underperforming loans and optimize financial outcomes. Ares has also made progress in resolving risk-rated loans, reducing them by 34% over the past year.