Ares Capital (ARCC) AI Stock Analysis

• Market Cap: $15.86B
• Dividend Yield: 8.58%
• Average Volume (3M): 3.40M
• Price to Earnings (P/E): 11.0
• Beta (1Y): 0.55
• Revenue Growth: 14.14%
• EPS Growth: -31.30%
• Country: US
• Employees: 1,200
• Sector: Financial
• Sector Strength: 64
• Industry: Asset Management
• EPS (TTM): 0.50
• Shares Outstanding: 705,367,430
• 10 Day Avg. Volume: 3,886,895
• 30 Day Avg. Volume: 3,399,675
• PEG Ratio: N/A
• Price to Book (P/B): 0.00
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.81
• Enterprise Value/Revenue: 12.18
• Enterprise Value/Gross Profit: 19.78
• Enterprise Value/Ebitda: 15.39
• 1Y Price Target: $23.09
• Price Target Upside: 3.08% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 12

• Rating: 74 Outperform
• Price Target: ―

Ares Capital exhibits strong financial stability and an attractive valuation, supported by a consistent dividend strategy. However, challenges with revenue growth, cash flow stability, and market momentum temper the outlook. The positive leadership transition and robust earnings guidance add confidence, but potential risks in the loan market warrant cautious optimism.

Positive Factors

Market Expansion

Ivy Hill gives more flexibility and positions the BDC well for a potential market expansion through a looming M&A comeback.

Portfolio Growth

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

Negative Factors

Core Earnings Decline

ARCC showed an 8% sequential decline in Core EPS per share with 71% conversion to GAAP earnings.

Non-Accruals

New non-accruals included North Haven Falcon, Aimbridge, Maverick Acquisition and Implus Footcare, bringing non-accruals to 1.7% of cost from 1.3%.

Ares Capital Business Overview & Revenue Model

Company Description

Ares Capital Corporation (ARCC) is a leading specialty finance company that primarily operates in the business development company (BDC) sector. ARCC is focused on providing direct lending solutions to middle-market companies across a diverse range of industries. The company offers a variety of financing solutions, including senior secured loans, mezzanine debt, and equity investments, aiming to support the growth and expansion of its clients while generating attractive risk-adjusted returns for its investors.

How the Company Makes Money

Ares Capital Corporation makes money by providing capital to middle-market companies, primarily through direct lending. The company's revenue model involves earning interest and fees from its loan portfolio, where the primary sources of income include interest income from senior secured loans, subordinated debt, and mezzanine financing. Additionally, ARCC may generate income from equity investments through dividends or capital gains upon the sale of equity stakes. The company leverages its expertise in credit underwriting and active portfolio management to optimize returns and minimize credit losses. Significant partnerships with financial institutions and sponsors can also contribute to deal flow and enhance the company's ability to structure and syndicate larger transactions, further augmenting its revenue generation capabilities.

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	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.71B	1.64B	741.00M	1.68B	541.00M
Gross Profit	940.00M	1.73B	741.00M	1.82B	185.00M
EBITDA	2.32B	2.12B	1.16B	1.60B	823.00M
Net Income	1.52B	1.52B	600.00M	1.57B	484.00M
Balance Sheet
Total Assets	28.25B	23.80B	22.40B	20.84B	16.20B
Cash, Cash Equivalents and Short-Term Investments	635.00M	535.00M	303.00M	372.00M	254.00M
Total Debt	13.76B	11.94B	12.32B	11.14B	8.55B
Total Liabilities	14.90B	12.60B	12.84B	11.97B	9.02B
Stockholders Equity	13.36B	11.20B	9.55B	8.87B	7.18B
Cash Flow
Free Cash Flow	-2.13B	511.00M	-1.36B	-2.46B	-557.00M
Operating Cash Flow	-2.13B	511.00M	-1.36B	-2.46B	-557.00M
Investing Cash Flow	0.00	0.00	-2.10B	-3.39B	-1.29B
Financing Cash Flow	2.42B	-284.00M	1.21B	2.62B	707.00M

Ares Capital Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 22.40
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: 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 22.4 is below the 20-day moving average (MA) of 22.80, above the 50-day MA of 22.14, and above the 200-day MA of 21.26, indicating a neutral trend. The MACD of 0.10 indicates Positive momentum. The RSI at 48.97 is Neutral, neither overbought nor oversold. The STOCH value of 31.10 is Neutral, 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
HTGC	77 Outperform	$3.54B	12.84	12.81%	9.75%	-15.88%	-13.91%
TSLX	75 Outperform	$2.24B	11.87	11.66%	8.70%	-6.29%	-15.46%
ARCC	74 Outperform	$15.86B	11.01	10.25%	8.58%	14.14%	-31.30%
MAIN	74 Outperform	$0.00	10.90	19.31%	6.57%	51.80%	12.05%
GBDC	71 Outperform	$3.94B	10.45	9.33%	11.28%	16.10%	-24.30%
Sector *	67 Neutral	$17.01B	11.60	9.79%	3.95%	10.63%	1.62%
FSK	58 Neutral	$5.64B	10.60	7.97%	13.90%	-16.13%	-15.88%

Ares Capital Corporate Events

Ares Capital Announces New Equity Distribution Agreements

On February 5, 2025, Ares Capital Corporation entered into new equity distribution agreements with Truist, Jefferies, Mizuho, RBC, and Regions, enabling the potential sale of up to $1.5 billion in common stock. These agreements, which replace older agreements from July 2024, allow for sales based on market conditions and include standard terms such as commission rates and termination provisions.

Ares Capital Announces New CEO Appointment

On February 5, 2025, Ares Capital Corporation announced the appointment of Kort Schnabel as Chief Executive Officer, effective April 30, 2025. Schnabel, a long-time leader within the company known for his investment acumen and leadership, will succeed R. Kipp deVeer, who will step down but remain a board member and officer. This leadership transition is expected to continue driving Ares Capital’s growth objectives and maintain its position as a market leader in providing flexible capital solutions.