Ares Capital Corp (ARCC)
NASDAQ:ARCC
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Ares Capital
(NASDAQ:ARCC)
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Rating:63Neutral
Price Target:
$20.50
â–²(12.82% Upside)
Action:ReiteratedDate:02/28/26
The score is driven primarily by mixed fundamentals: strong profitability and supportive earnings-call commentary are tempered by the sharp 2025 negative operating/free cash flow and some 2025 data inconsistencies. Valuation is a clear positive (low P/E and high yield), while technicals remain weak with the stock trading below key moving averages.
Positive Factors
Record originations and borrower growth
Sustained record origination volume and meaningful new-borrower additions expand dealflow and underwriting optionality. Over the medium term this supports diversified interest income, improves selection ability across cycles, and reduces single-counterparty risk while feeding repeat fee opportunities.
Negative Factors
Sharp 2025 cash-flow reversal
A large swing to materially negative operating/free cash flow undermines earnings quality and raises questions about sustainable internal funding. If cash generation remains volatile, the firm will rely more on external financing for dividends and growth, increasing structural funding exposure.
Read all positive and negative factors
Positive Factors
Negative Factors
Record originations and borrower growth
Sustained record origination volume and meaningful new-borrower additions expand dealflow and underwriting optionality. Over the medium term this supports diversified interest income, improves selection ability across cycles, and reduces single-counterparty risk while feeding repeat fee opportunities.
Read all positive factors
Ares Capital (ARCC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$13.05B
Dividend Yield9.64%
Average Volume (3M)8.30M
Price to Earnings (P/E)10.9
Beta (1Y)0.68
Revenue Growth10.34%
EPS Growth-24.16%
CountryUS
Employees1,200
SectorFinancial
Sector Strength70
IndustryAsset Management
Share Statistics
EPS (TTM)0.50
Shares Outstanding718,022,800
10 Day Avg. Volume6,873,944
30 Day Avg. Volume8,301,653
Financial Highlights & Ratios
PEG Ratio-0.46
Price to Book (P/B)0.99
Price to Sales (P/S)4.50
P/FCF Ratio12.38
Enterprise Value/Market Cap2.15
Enterprise Value/Revenue12.14
Enterprise Value/Gross Profit17.70
Enterprise Value/Ebitda17.73
Forecast
1Y Price Target
$20.83Price Target Upside14.64% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering6
EPS Forecast (FY)1.94
Revenue Forecast (FY)$3.16B
Ares Capital Business Overview & Revenue Model
Company Description
Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital ...
How the Company Makes Money
Ares Capital generates revenue primarily through interest income from its debt investments, which typically have higher yields compared to traditional fixed-income securities. The company earns interest on the loans it provides to middle-market fi...
Ares Capital Earnings Call Summary
Earnings Call Date:Feb 04, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 28, 2026
Earnings Call Sentiment Positive
The call emphasized multiple company records (originations, new debt commitments, portfolio growth), strong credit performance (low non-accruals, improved coverage ratios), substantial realized gains and robust liquidity and funding diversification. The primary negatives were lower core and GAAP EPS driven by declines in base rates (with an anticipated ~$0.10/share headwind for 2026), a modest QoQ NAV dip, and ongoing market/competitive uncertainties (retail flow choppiness and AI-related sector risk). Overall the positives — record origination and funding activity, portfolio diversification, strong credit metrics, and dividend coverage — materially outweighed the identified headwinds.Positive Updates
Record Originations and New Borrowers
Gross originations reached a company record $15.8 billion in 2025; fourth-quarter originations were over $5.8 billion (up >50% vs prior-year quarter). ARCC added more than 100 new borrowers in 2025, ending the year with 603 borrowers (nearly +10% YoY).
Negative Updates
Year-over-Year Decline in Core Earnings
Full-year core EPS declined to $2.01 in 2025 from $2.33 in 2024 (approximately -13.7% YoY). Q4 core EPS was $0.50 vs $0.55 in Q4 2024 (down ~9.1%). Management attributes much of the decline to lower base rates.
Read all updates
Q4-2025 Updates
Positive
Negative
Record Originations and New Borrowers
Gross originations reached a company record $15.8 billion in 2025; fourth-quarter originations were over $5.8 billion (up >50% vs prior-year quarter). ARCC added more than 100 new borrowers in 2025, ending the year with 603 borrowers (nearly +10% YoY).
Read all positive updates
Company Guidance
Management reiterated confidence in maintaining the dividend, noting core EPS of $0.50 in Q4 and $2.01 for FY2025 (fully covering dividends) and announcing a Q1 2026 dividend of $0.48 payable March 31 (record March 13); they also flagged an expected ~ $0.10 per share 2026 headwind to core earnings from recent base rate declines but noted ~$988 million ($1.38/share) of taxable spillover as additional cushion. Key balance‑sheet and funding metrics supporting the outlook include portfolio fair value of $29.5 billion, NAV $14.3 billion ($19.94/share, -0.35% q/q, +0.25% y/y), net debt/equity of 1.08x (below the ~1.1x stated level and well under the 1.25x upper target), pro‑forma liquidity > $6.0 billion, $4.5 billion of new gross debt commitments in 2025, $2.4 billion of unsecured notes issued, a $750 million five‑year deal in early 2026 (swapped to SOFR+172bps), $1.4 billion of expanded bank capacity (avg spreads down ~20bps), a $700 million on‑balance CLO at blended SOFR+147bps, and ~70% floating‑rate borrowings (vs ~50% YE2024). On originations and credit, 2025 gross commitments were a record $15.8 billion (Q4 > $5.8 billion, +50% YoY), the portfolio grew to ~603 borrowers (added >100 new names), non‑sponsored originations rose >50%, average position size ~0.2%, average portfolio leverage down ~0.25x EBITDA y/y, average interest coverage 2.2x, weighted average organic EBITDA growth ~9% y/y (well above GDP and syndicated loan peers), weighted average portfolio grade 3.1, non‑accruals 1.8% at cost / 1.2% at fair value, pretax net realized gains >$100 million and >$470 million of equity co‑investment gross realizations (avg IRR >25%, >3x money).Ares Capital Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
62
Positive
Cash Flow
40
Negative
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 3.15B | 2.37B | 2.17B | 1.20B | 2.05B |
| Gross Profit | 2.38B | 1.71B | 1.64B | 741.00M | 1.68B |
| EBITDA | 2.19B | 1.59B | 1.54B | 655.00M | 1.60B |
| Net Income | 1.30B | 1.52B | 1.52B | 600.00M | 1.57B |
Balance Sheet | |||||
| Total Assets | 31.23B | 28.25B | 23.80B | 22.40B | 20.84B |
| Cash, Cash Equivalents and Short-Term Investments | 924.00M | 635.00M | 535.00M | 303.00M | 372.00M |
| Total Debt | 15.99B | 13.76B | 11.95B | 12.38B | 11.16B |
| Total Liabilities | 16.92B | 14.90B | 12.60B | 12.84B | 11.97B |
| Stockholders Equity | 14.32B | 13.36B | 11.20B | 9.55B | 8.87B |
Cash Flow | |||||
| Free Cash Flow | 1.14B | 1.28B | 1.00B | 746.00M | 935.00M |
| Operating Cash Flow | 1.14B | 1.28B | 1.00B | 746.00M | 935.00M |
| Investing Cash Flow | -2.86B | -3.41B | -489.00M | -2.10B | -3.39B |
| Financing Cash Flow | 1.78B | 2.42B | -284.00M | 1.21B | 2.62B |
Ares Capital Technical Analysis
Neutral
18.17
Price Trends
18.48
Negative
19.08
Negative
19.64
Negative
Market Momentum
-0.12
Negative
49.92
Neutral
78.01
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARCC, the sentiment is Neutral. The current price of 18.17 is above the 20-day moving average (MA) of 18.00, below the 50-day MA of 18.48, and below the 200-day MA of 19.64, indicating a neutral trend. The MACD of -0.12 indicates Negative momentum. The RSI at 49.92 is Neutral, neither overbought nor oversold. The STOCH value of 78.01 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ARCC.
Ares Capital Risk Analysis
Ares Capital disclosed 57 risk factors in its most recent earnings report. Ares Capital reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Ares Capital Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
63 Neutral | $13.05B | 10.89 | 9.22% | 9.64% | 10.34% | -24.16% | |
63 Neutral | $3.33B | 13.71 | 8.30% | 11.70% | 24.12% | 1.09% | |
62 Neutral | $2.75B | 9.36 | 15.88% | 10.00% | -15.32% | -12.29% | |
61 Neutral | $4.90B | 10.94 | 16.94% | 7.17% | 11.60% | 9.38% | |
59 Neutral | $14.70B | 48.03 | 16.10% | 3.03% | 25.02% | 235.70% | |
56 Neutral | $2.87B | -9.10 | 0.18% | 18.52% | -13.67% | -48.49% |
* Financial Sector Average
ARCC
Ares Capital
18.17
-0.82
-4.33%
GBDC
Golub Capital Bdc
12.64
0.01
0.10%
HTGC
Hercules Capital, Inc.
14.98
-0.70
-4.45%
MAIN
Main Street Capital
54.38
5.12
10.39%
FSK
FS KKR Capital
10.24
-6.30
-38.08%
TPG
TPG
38.26
-6.47
-14.47%
Ares Capital Corporate Events
Business Operations and StrategyPrivate Placements and Financing
Ares Capital Expands and Lowers Cost of SMBC Facility
Positive
Feb 27, 2026
On February 25, 2026, Ares Capital Corporation and its wholly owned subsidiary Ares Capital JB Funding LLC amended their long-standing SMBC Funding Facility with Sumitomo Mitsui Banking Corporation, increasing total commitments from $1.1 billion t...
DividendsFinancial Disclosures
Ares Capital Reports Strong 2025 Results, Maintains Dividend
Positive
Feb 4, 2026
On February 4, 2026, Ares Capital Corporation reported its financial results for the fourth quarter and full year ended December 31, 2025, alongside declaring a first-quarter 2026 dividend of $0.48 per share, payable on March 31, 2026 to sharehold...
Business Operations and StrategyPrivate Placements and Financing
Ares Capital Issues $750 Million Notes and Swaps Rate
Positive
Jan 12, 2026
On January 12, 2026, Ares Capital Corporation completed the issuance and sale of $750 million aggregate principal amount of 5.250% unsecured notes due April 12, 2031, under a supplemental indenture with U.S. Bank Trust Company, National Associatio...
Business Operations and StrategyPrivate Placements and Financing
Ares Capital Completes $1 Billion Debt Securitization
Positive
Dec 9, 2025
On December 3, 2025, Ares Capital Corporation completed a $1.0 billion term debt securitization through its subsidiary, Ares Direct Lending CLO 7 LLC. This transaction, known as the ADL CLO 7 Debt Securitization, involves issuing various classes o...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.