Ares Capital (ARCC) AI Stock Analysis

• Market Cap: $15.69B
• Dividend Yield: 8.63%
• Average Volume (3M): 3.46M
• Price to Earnings (P/E): 10.8
• Beta (1Y): 0.56
• Revenue Growth: 7.71%
• EPS Growth: -29.47%
• Country: US
• Employees: 1,200
• Sector: Financial
• Sector Strength: 74
• Industry: Asset Management
• EPS (TTM): 0.50
• Shares Outstanding: 705,367,430
• 10 Day Avg. Volume: 3,291,112
• 30 Day Avg. Volume: 3,455,770
• 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: 1.83
• Enterprise Value/Revenue: 12.18
• Enterprise Value/Gross Profit: 19.78
• Enterprise Value/Ebitda: 15.39
• 1Y Price Target: $23.14
• Price Target Upside: 4.00% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 12

• Rating: 74 Outperform
• Price Target: ―

Ares Capital's overall score is driven by strong financial performance, particularly in profitability and balance sheet stability, and a favorable valuation with a high dividend yield. Technical analysis indicates some bearish momentum, but the positive earnings call outlook supports the stock's potential.

Positive Factors

Market Position

Ares Capital is considered one of the best positioned BDCs to gain share and generate solid risk-adjusted returns in the current economic backdrop.

Portfolio Growth

The portfolio of Ares Capital increased by 1.5% to $27 billion, showing growth in net commitments.

Transaction Volume

Yield pressure appears to be stabilizing and ARCC is seeing signs of improving transaction volume, which should support top and bottom-line growth.

Negative Factors

Dividend Coverage

Regular dividend coverage softened to 104%, providing less cushion.

Earnings

Core EPS was slightly below the BofA/Consensus forecast due to lower interest income.

Unrealized Losses

Significant unrealized losses included SDLP, Implus Footcare, VProp Operating, and liquid names Neptune and Symplr.

Ares Capital Business Overview & Revenue Model

Company Description

Ares Capital Corporation (ARCC) is a leading publicly traded business development company headquartered in Los Angeles, California. As a subsidiary of Ares Management Corporation, ARCC primarily focuses on providing debt and equity financing solutions to middle-market companies across various sectors, including healthcare, technology, and manufacturing. The company aims to generate attractive risk-adjusted returns for its shareholders by investing in a diverse portfolio of businesses, typically through senior secured loans, subordinated debt, and equity investments.

How the Company Makes Money

Ares Capital generates revenue primarily through interest income from its investment portfolio, which includes loans and debt securities issued to middle-market companies. The company earns interest on the loans it provides, which typically feature higher interest rates compared to traditional bank loans due to the additional risk associated with lending to middle-market businesses. In addition to interest income, ARCC also gains revenue from fees associated with the origination, structuring, and management of these investments. The company may also realize capital gains from equity investments when it exits these positions. Significant partnerships with private equity firms and other financial institutions can enhance ARCC's deal flow and provide opportunities for co-investments, further contributing to its revenue streams.

Ares Capital Financial Statement Overview

Summary

Ares Capital shows strong profitability and stability through a high EBIT margin and robust equity position. However, inconsistent revenue growth and challenges with cash flow stability present potential risks.

Income Statement

Ares Capital has shown strong profitability with a high EBIT margin consistently over the years, peaking at 92.4% in 2023. However, revenue growth has been inconsistent, with a notable decline in 2024. The company maintains solid net profit margins, indicating efficient cost management.

Balance Sheet

The balance sheet indicates a robust equity position with a high equity ratio of 47.3% in 2024 and no debts recorded, showing financial stability. Return on equity has been strong, though it decreased in 2024 compared to 2023, suggesting a lower return on equity investment.

Cash Flow

Cash flow analysis reveals challenges with negative free cash flow in recent years, despite significant positive operating cash flow in 2023. The variability in cash flows indicates potential risks in cash management and operational efficiency.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	2.36B	1.71B	1.64B	741.00M	1.68B	541.00M
Gross Profit	1.45B	940.00M	1.73B	741.00M	1.82B	185.00M
EBITDA	1.86B	2.32B	2.12B	1.16B	1.60B	823.00M
Net Income	1.46B	1.52B	1.52B	600.00M	1.57B	484.00M
Balance Sheet
Total Assets	29.07B	28.25B	23.80B	22.40B	20.84B	16.20B
Cash, Cash Equivalents and Short-Term Investments	447.00M	635.00M	535.00M	303.00M	372.00M	254.00M
Total Debt	0.00	13.76B	11.94B	12.32B	11.14B	8.55B
Total Liabilities	15.04B	14.90B	12.60B	12.84B	11.97B	9.02B
Stockholders Equity	14.03B	13.36B	11.20B	9.55B	8.87B	7.18B
Cash Flow
Free Cash Flow	1.28B	1.28B	1.00B	746.00M	935.00M	734.00M
Operating Cash Flow	1.28B	1.28B	1.00B	746.00M	935.00M	734.00M
Investing Cash Flow	-2.58B	-3.41B	-489.00M	-2.10B	-3.39B	-1.29B
Financing Cash Flow	1.29B	2.42B	-284.00M	1.21B	2.62B	707.00M

Ares Capital Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 22.25
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

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 22.25 is below the 20-day moving average (MA) of 22.43, below the 50-day MA of 22.39, and above the 200-day MA of 21.43, indicating a neutral trend. The MACD of -0.07 indicates Positive momentum. The RSI at 44.34 is Neutral, neither overbought nor oversold. The STOCH value of 18.62 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ARCC.

Ares Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TSLX	76 Outperform	$2.27B	12.02	11.66%	8.61%	-6.29%	-15.46%
ARCC	74 Outperform	$15.69B	10.82	10.25%	8.63%	7.71%	-29.47%
MAIN	74 Outperform	$5.78B	10.54	19.65%	6.48%	28.32%	13.63%
GBDC	71 Outperform	$3.92B	10.35	9.33%	11.33%	32.19%	-13.72%
Sector *	68 Neutral	$17.69B	11.82	10.30%	3.73%	9.66%	0.42%
HTGC	64 Neutral	$3.51B	12.66	12.81%	9.79%	-15.88%	-13.91%
FSK	58 Neutral	$5.02B	22.97	3.39%	15.62%	-8.32%	-65.56%

Ares Capital Corporate Events

Ares Capital Approves Share Issuance Below Net Asset Value

On August 8, 2025, Ares Capital Corporation held a special meeting of stockholders where a proposal was approved to allow the company to sell or issue shares of its common stock at a price below its current net asset value per share, subject to certain limitations. This authorization, which includes a cap that the number of shares issued does not exceed 25% of its outstanding shares, will be effective for a twelve-month period ending on August 8, 2026.

Ares Capital Announces Q2 2025 Financial Results

On July 29, 2025, Ares Capital Corporation announced its financial results for the second quarter ending June 30, 2025, and declared a third quarter dividend of $0.48 per share, payable on September 30, 2025. The company reported a GAAP net income per share of $0.52 and a core EPS of $0.50, with net investment income totaling $342 million. The announcement reflects Ares Capital’s stable financial performance and commitment to returning value to its shareholders, maintaining its position as a strong player in the specialty finance sector.

Ares Capital Completes $750M Note Issuance

On June 3, 2025, Ares Capital Corporation completed a transaction involving the issuance and sale of $750 million in 5.500% notes due 2030, under a Third Supplemental Indenture with U.S. Bank Trust Company. The proceeds from this offering are intended to repay certain outstanding debts, with the potential for reborrowing for general corporate purposes. The company also entered into an interest rate swap agreement to convert the fixed interest rate to a floating rate, enhancing its financial flexibility. This strategic financial maneuver aims to strengthen Ares Capital’s operational capacity and investment potential, while adhering to regulatory covenants and maintaining its market position.