Ares Capital (ARCC) AI Stock Analysis

• Market Cap: $15.04B
• Dividend Yield: 9.14%
• Average Volume (3M): 4.14M
• Price to Earnings (P/E): 10.6
• Beta (1Y): 0.61
• Revenue Growth: 10.34%
• EPS Growth: -24.16%
• Country: US
• Employees: 1,200
• Sector: Financial
• Sector Strength: 70
• Industry: Asset Management
• EPS (TTM): 0.50
• Shares Outstanding: 715,726,600
• 10 Day Avg. Volume: 3,245,557
• 30 Day Avg. Volume: 4,142,666
• PEG Ratio: -0.80
• Price to Book (P/B): 1.02
• Price to Sales (P/S): 5.77
• P/FCF Ratio: 10.65
• Enterprise Value/Market Cap: 1.92
• Enterprise Value/Revenue: 12.83
• Enterprise Value/Gross Profit: 18.79
• Enterprise Value/Ebitda: 20.20
• 1Y Price Target: $22.44
• Price Target Upside: 6.86% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 10
• EPS Forecast (FY): 2
• Revenue Forecast (FY): $3.06B

• Rating: 80 Outperform
• Price Target: $24.00 ▲(14.29% Upside)

Ares Capital's strong financial performance, attractive valuation, and positive technical indicators contribute significantly to its overall score. The recent earnings call and corporate events further bolster its position, highlighting robust transaction volumes and enhanced financial flexibility.

Positive Factors

Financial Flexibility

The $1 billion debt securitization enhances Ares Capital's financial flexibility, allowing it to repay debt and invest in portfolio companies, strengthening its strategic market position.

Strong Credit Quality

Improved interest coverage and declining nonaccruals indicate strong credit quality, ensuring stability and reducing risk in Ares Capital's lending portfolio.

Consistent Dividend Growth

Consistent NAV growth and dividend increases over the past decade highlight Ares Capital's commitment to returning value to shareholders, enhancing investor confidence.

Negative Factors

Decline in Core Earnings

The decline in core earnings year-over-year suggests potential challenges in maintaining profitability, which could impact future earnings stability and growth.

Capital Gains Taxes

Significant capital gains taxes reduce net income, affecting cash flow and potentially limiting reinvestment opportunities and shareholder returns.

Modest Revenue Growth

Modest revenue growth indicates limited expansion, which may challenge Ares Capital's ability to scale operations and increase market share in a competitive industry.

Ares Capital Business Overview & Revenue Model

Company Description

Ares Capital Corporation (ARCC) is a leading business development company that specializes in providing financing solutions to middle-market companies across various sectors, including healthcare, technology, and manufacturing. The company primarily focuses on debt investments, such as senior secured loans and subordinated debt, as well as equity investments in these companies. Ares Capital aims to generate attractive risk-adjusted returns for its investors by partnering with experienced management teams and capitalizing on growth opportunities in the private equity market.

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 firms, often structured with various terms and rates based on the risk profile of the borrower. Additionally, Ares Capital receives fees for originating, structuring, and managing these investments, contributing to its revenue stream. The company may also earn capital gains and dividend income from its equity investments in portfolio companies. Significant partnerships with private equity firms and investment advisors enhance its deal flow and provide access to a broader range of investment opportunities, further driving its earnings potential.

Ares Capital Financial Statement Overview

Summary

Ares Capital demonstrates strong financial performance with robust profitability and efficient cost management, as evidenced by a net profit margin of 57.48% and a solid return on equity of 10.26%. However, fluctuating revenue growth and limited cash flow efficiency insights slightly temper the overall financial strength.

Income Statement

Ares Capital has demonstrated strong revenue growth with a TTM increase of 20.37%. The company maintains healthy margins, including a net profit margin of 57.48% and an EBIT margin of 40.41% in the TTM period. These metrics indicate robust profitability and efficient cost management. However, the revenue growth rate has fluctuated over the years, which could pose a risk if not stabilized.

Balance Sheet

The company's debt-to-equity ratio has improved to 1.00 in the TTM period, indicating a balanced leverage position. Return on equity is solid at 10.26%, reflecting effective use of equity to generate profits. However, the equity ratio is not explicitly provided, which limits a full assessment of asset financing stability.

Cash Flow

Ares Capital shows a consistent free cash flow to net income ratio of 1.0, indicating that net income is well-supported by cash flow. The free cash flow growth rate is positive at 2.66% in the TTM period, showing a stable cash generation capability. However, the operating cash flow to net income ratio is not available, which could provide further insights into cash flow efficiency.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	2.25B	2.37B	2.17B	1.20B	2.05B	858.00M
Gross Profit	1.53B	1.71B	1.64B	741.00M	1.68B	541.00M
EBITDA	1.43B	1.59B	1.54B	655.00M	1.60B	503.00M
Net Income	1.36B	1.52B	1.52B	600.00M	1.57B	484.00M
Balance Sheet
Total Assets	30.81B	28.25B	23.80B	22.40B	20.84B	16.20B
Cash, Cash Equivalents and Short-Term Investments	1.04B	635.00M	535.00M	303.00M	372.00M	254.00M
Total Debt	15.61B	13.76B	11.95B	12.38B	11.16B	8.60B
Total Liabilities	16.48B	14.90B	12.60B	12.84B	11.97B	9.02B
Stockholders Equity	14.32B	13.36B	11.20B	9.55B	8.87B	7.18B
Cash Flow
Free Cash Flow	1.30B	1.28B	1.00B	746.00M	935.00M	734.00M
Operating Cash Flow	1.30B	1.28B	1.00B	746.00M	935.00M	734.00M
Investing Cash Flow	-2.86B	-3.41B	-489.00M	-2.10B	-3.39B	-1.29B
Financing Cash Flow	2.19B	2.42B	-284.00M	1.21B	2.62B	707.00M

Ares Capital Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 21.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ARCC, the sentiment is Positive. The current price of 21 is above the 20-day moving average (MA) of 20.34, above the 50-day MA of 20.14, and above the 200-day MA of 20.89, indicating a bullish trend. The MACD of 0.22 indicates Negative momentum. The RSI at 65.90 is Neutral, neither overbought nor oversold. The STOCH value of 88.89 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ARCC.

Ares Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ARCC	80 Outperform	$15.04B	10.56	10.06%	9.14%	10.34%	-24.16%
HTGC	79 Outperform	$3.45B	11.04	15.21%	9.73%	-15.32%	-12.29%
MAIN	75 Outperform	$5.44B	10.07	19.07%	6.28%	11.60%	9.38%
GBDC	71 Outperform	$3.77B	10.10	9.42%	11.51%	24.12%	1.09%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
TPG	61 Neutral	$23.32B	643.95	7.19%	3.02%	25.02%	235.70%
FSK	58 Neutral	$4.33B	15.92	4.24%	17.24%	-13.67%	-48.49%

Ares Capital Corporate Events

Ares Capital Completes $1 Billion Debt Securitization

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 of notes backed by a diversified portfolio of first lien senior secured loans. The company plans to use the proceeds to repay outstanding debt and invest in portfolio companies, enhancing its financial flexibility and strategic positioning in the market.

Ares Capital Announces Q3 2025 Financial Results

On October 28, 2025, Ares Capital Corporation announced its financial results for the third quarter ending September 30, 2025, and declared a fourth quarter dividend of $0.48 per share, payable on December 30, 2025. The company’s financial performance showed a slight decrease in GAAP net income per share compared to the previous year, with net investment income also declining. However, the company’s portfolio investments and total assets increased, indicating a robust market position.