Ares Capital (ARCC) AI Stock Analysis

• Market Cap: $14.00B
• Dividend Yield: 9.64%
• Average Volume (3M): 4.85M
• Price to Earnings (P/E): 10.5
• Beta (1Y): 0.65
• 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: 6,666,838
• 30 Day Avg. Volume: 4,847,023
• PEG Ratio: -0.52
• Price to Book (P/B): 0.99
• Price to Sales (P/S): 7.51
• P/FCF Ratio: -8.24
• Enterprise Value/Market Cap: 2.04
• Enterprise Value/Revenue: 15.15
• Enterprise Value/Gross Profit: 24.07
• Enterprise Value/Ebitda: 26.31
• 1Y Price Target: $22.00
• Price Target Upside: 17.08% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 3
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 62 Neutral
• Price Target: $20.50 ▲(9.10% Upside)

The score is most constrained by weak financial quality signals from the latest period (materially negative 2025 operating/free cash flow and data inconsistencies) and bearish technical trend indicators. These are partly offset by attractive valuation (low P/E and high dividend yield) and a generally positive earnings-call outlook highlighting dividend coverage, strong credit performance, and ample liquidity despite rate-driven earnings headwinds.

Positive Factors

Origination scale & diversification

Sustained record originations and a growing borrower base support durable fee and interest income, broaden deal sourcing and reduce single-name risk. Scale enables selective underwriting, better pricing leverage versus competitors and recurring origination pipelines that underpin revenue resilience over months to years.

Credit quality & low non-accruals

Consistently low non-accruals indicate disciplined underwriting and portfolio resilience, limiting downside to NAV and preserving interest income. Over a multi-month horizon this reduces loss realization risk, supports dividend sustainability and keeps capital deployment options open during credit cycles.

Funding & liquidity strength

Robust, diversified funding and ample liquidity reduce refinancing risk and support continued originations. Multiple channels (unsecured notes, CLOs, bank lines) plus sizable cash cushions provide tactical flexibility to deploy capital, manage maturities and sustain dividends amid market stress over the medium term.

Negative Factors

Cash flow volatility

A sharp reversal to negative operating and free cash flow undermines cash conversion of earnings and raises questions about recurring distributable cash. Over several months this increases reliance on realized gains, asset sales or new borrowing to fund dividends and investments, elevating funding and execution risk.

2025 financial data inconsistencies

Apparent reporting anomalies in core operating and balance-sheet items impede clear assessment of leverage, profitability and cash generation. Persistent data uncertainty reduces investor confidence and complicates forward planning, making it harder to evaluate sustainable dividend coverage and capital allocation over the medium term.

Meaningful leverage & interest exposure

Material leverage and high floating-rate funding amplify sensitivity to interest-rate and spread moves, causing earnings and NAV volatility. While leverage supports yield, it also constrains downside absorption and increases refinancing and margin pressure risks if credit or funding conditions tighten over the coming months.

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 and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors. The fund will also consider investments in industries such as restaurants, retail, oil and gas, and technology sectors. It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office. The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million The fund invests through revolvers, first lien loans, warrants, unitranche structures, second lien loans, mezzanine debt, private high yield, junior capital, subordinated debt, and non-control preferred and common equity. The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically considers the purchase of stressed and discounted debt positions. The fund prefers to be an agent and/or lead the transactions in which it invests. The fund also seeks board representation in its portfolio companies.

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

Strong profitability and recent revenue growth are positives, but the 2025 sharp swing to materially negative operating/free cash flow is a major concern for cash conversion. Balance-sheet leverage appears meaningful historically, and multiple 2025 line-item inconsistencies (e.g., zero operating profit items and reported zero total debt) reduce confidence in the latest-year snapshot.

Income Statement

Revenue has grown over the last three years (2022–2025 annual), with 2025 showing a solid +12.8% increase versus 2024, indicating improving top-line momentum after earlier volatility (notably the 2022 decline). Profitability is a clear strength: net profit margins are consistently very high (roughly 50%–76% across 2020–2025), supporting strong earnings power. A key weakness is data quality/consistency in 2025 where operating profit line items show as zero (gross profit/EBIT/EBITDA), which clouds visibility into operating performance even though net income remains strong.

Balance Sheet

The balance sheet shows solid scale and equity growth (stockholders’ equity rising from $7.2B in 2020 to $14.3B in 2025), which supports resilience. However, leverage is meaningful in the available years: debt-to-equity ran around ~1.0–1.3 from 2020–2024, implying reliance on borrowing. Return on equity is healthy overall (about ~6%–18% historically, ~11% in 2024), but it has moderated from peak levels, suggesting profitability on capital is less robust than earlier periods. 2025 reports total debt as $0, which is a major inconsistency versus prior years and increases uncertainty in assessing current leverage.

Cash Flow

Cash generation was positive and improving from 2022–2024, with operating cash flow and free cash flow reaching $1.28B in 2024 and showing positive growth versus 2023. The primary concern is the sharp reversal in 2025, with operating cash flow and free cash flow turning materially negative (about -$1.72B) and showing a steep decline versus the prior period. Coverage of net income by operating cash flow was strong in 2024 but has been inconsistent across years and breaks down in 2025, raising questions about earnings quality and cash flow volatility.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	1.88B	2.37B	2.17B	1.20B	2.05B
Gross Profit	1.18B	1.71B	1.64B	741.00M	1.68B
EBITDA	1.08B	1.59B	1.54B	655.00M	1.60B
Net Income	1.15B	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	638.00M	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	-1.72B	1.28B	1.00B	746.00M	935.00M
Operating Cash Flow	-1.72B	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

• Technical Analysis Sentiment: Negative
• Last Price: 18.79
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• 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 Negative. The current price of 18.79 is below the 20-day moving average (MA) of 20.32, below the 50-day MA of 20.27, and below the 200-day MA of 20.45, indicating a bearish trend. The MACD of -0.28 indicates Positive momentum. The RSI at 30.27 is Neutral, neither overbought nor oversold. The STOCH value of 10.16 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ARCC.

Ares Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
HTGC	79 Outperform	$3.09B	9.88	15.21%	10.00%	-15.32%	-12.29%
MAIN	77 Outperform	$5.50B	10.18	19.07%	7.17%	11.60%	9.38%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
GBDC	63 Neutral	$3.44B	10.51	9.42%	11.70%	24.12%	1.09%
ARCC	62 Neutral	$14.00B	10.53	10.06%	9.64%	10.34%	-24.16%
FSK	60 Neutral	$3.72B	13.54	4.24%	18.52%	-13.67%	-48.49%
TPG	58 Neutral	$21.21B	124.64	14.28%	3.03%	25.02%	235.70%

Ares Capital Corporate Events

Ares Capital Reports Strong 2025 Results, Maintains Dividend

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 shareholders of record on March 13, 2026. For 2025, the company generated GAAP net income of $1.86 per share and core EPS of $2.01, supported by $1.415 billion in net investment income, while maintaining an annual dividend of $1.92 per share, matching the prior year; the year also saw portfolio investments at fair value rise to $29.5 billion and total assets increase to $31.2 billion, indicating balance-sheet expansion despite periods of net realized losses and fluctuating unrealized gains and losses. These results underscore Ares Capital’s continued ability to cover and sustain its dividend from earnings, reinforcing its appeal to income-focused investors and highlighting its scale and resilience within the business development company market.

The most recent analyst rating on (ARCC) stock is a Buy with a $24.50 price target. To see the full list of analyst forecasts on Ares Capital stock, see the ARCC Stock Forecast page.

Ares Capital Issues $750 Million Notes and Swaps Rate

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 Association as trustee. The notes, which pay interest semiannually starting April 12, 2026, include covenants tied to Investment Company Act leverage requirements, reporting obligations if Ares Capital ceases to be an Exchange Act filer, and a change-of-control repurchase feature if the notes are downgraded below investment grade by all three major rating agencies. Ares Capital intends to use the net proceeds to repay borrowings under its credit facilities, with capacity to reborrow for general corporate purposes including new portfolio investments, thereby optimizing its liability structure and preserving funding flexibility. In a related step, on January 5, 2026, the company entered into a purchase agreement with a syndicate of underwriters for the notes and simultaneously executed a $750 million interest rate swap with SMBC Capital Markets, Inc., converting its fixed 5.250% coupon into a floating rate based on one‑month SOFR plus 1.7217% through April 12, 2031, which aligns its funding costs more closely with short-term rates and may reduce interest rate risk.

The most recent analyst rating on (ARCC) stock is a Buy with a $23.00 price target. To see the full list of analyst forecasts on Ares Capital stock, see the ARCC Stock Forecast page.

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.

The most recent analyst rating on (ARCC) stock is a Buy with a $22.00 price target. To see the full list of analyst forecasts on Ares Capital stock, see the ARCC Stock Forecast page.