Market Inference Overview -- ARCC Stock

Ares Capital logged a -0.3% change during today's morning session, and is now trading at a price of $18.41 per share.

Ares Capital shares moved -6.8% over the last 52 weeks, with a high of $21.45 and a low of $16.53. During this time, the stock lagged the S&P 500 index by -6.0%. As of January 2022, the company's 50-day average price is $18.51. 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. The mid-cap Finance company is based in Los Angeles, CA. Ares Capital has returned a 9.5% dividend yield over the last 12 months.

Snapshot of the Company's Net Margins Consistently Higher Than the 26.32% Industry Average:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (k) $824,000 $541,000 $1,678,000 $741,000
Revenue Growth n/a -34.34% 210.17% -55.84%
Net Margins 96.24% 89.46% 93.38% 80.97%
Net Margins Growth n/a -7.04% 4.38% -13.29%
Earnings Per Share $1.86 $1.14 $3.51 $1.17
EPS Growth n/a -38.71% 207.89% -66.67%
Diluted Shares (MM) 427 424 446 545
Free Cash Flow (k) -$1,210,000 -$557,000 -$2,459,000 -$1,359,000
FCF Growth n/a 53.97% -341.47% 44.73%

Ares Capital Is Fairly Priced at Current Levels:

Compared to the Finance sector's average of 14.34, Ares Capital has a trailing twelve month P/E ratio of 15.7 and, according to its EPS guidance of 2.27, an expected P/E ratio of 8.1. Ares Capital's PEG ratio is 3.89 based on its 4.1% compound average growth rate of historical and projected earnings per share. This suggests that the company's shares are overvalued.

However, Ares Capital is likely undervalued in terms of its equity because its P/B ratio is 1.0 compared to its sector average of 1.57. The company's shares are currently trading -34.7% below their Graham number, implying there is a margin of safety for the stock. The Graham number is calculated according to the formula:

√(22.5 * 4-year average EPS * book value per share) = √(22.5 * 1.92 * 18.41) = $28.2

Ares Capital Benefits From Positive Market Indicators:

14 analysts are following Ares Capital and have set target prices ranging from $18.0 to $24.0 per share. On average, they have given the company a rating of buy. At the current price of $18.41, ARCC is trading -12.5% away from its average analyst target price of $21.04 per share, implying an analyst consensus of some upside potential for the stock.

The company has an average amount of shares sold short since 3.6% of the company's shares are tied to short positions. Institutions own 31.4% of Ares Capital's shares, while the insider ownership rate stands at 1.38%. The biggest shareholder is Royal Bank of Canada with a 2% stake in the company worth approximately $208,330,064.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.