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Fundamental analysis: Ares Capital Corporation (ARCC)

Awarener score: 4.4

Conclusion

The higher the Awarener score, the more bang you get for the buck. It measures how much genuine funds the company generates for the stock price paid (could not be estimated), the business stability (Lacking) and growth (Modest), and the company's inclination to return cash to the stockholders (Lacking).

Note: All scores range from 1 (worst) to 10 (best). Conclusions are updated daily with closing stock prices and new reported quarterly financial statements.

Revenue score: 4.5

  • Business growth has been almost stagnant. It's been almost average when measured against peer companies.
  • Ares Capital Corporation business shows some variation, there's some risk. It looks top-notch against rivals.

Margins score: 8.3

  • ARCC profit margins -on goods and services sold- are usually sufficient. They stand slightly better than rival companies.
  • Business profit on sales tends to be meagre. It's substantially worse when measured against competitors.
  • Profits on sales made -available to repay debt and purchase properties- are usually huge. They remain a slight improvement compared to peers.
  • Earnings -before income taxes and interests on loans taken- tend to be huge in relation to total revenues. They're still slightly better than similar companies.
  • Profits -before income taxes- are usually huge considering total sales, and remain similar to rivals.
  • Total net profit tends to be huge when confronted to sales. Company stands encouraging in relation to comparable firms.

Growth score: 5.7

  • Ares Capital Corporation profit -on goods and services sold- has been shrinking. It's been in a very weak position compared to competitors.
  • There is not sufficient data to estimate the operating income margin trend, which has been therefore unknown against comparable firms.
  • In past years, the company couldn't always turn a profit -available to repay debt and purchase properties-, which compares last-in-rank when measured against peer enterprises.
  • In the previous years, the firm couldn't always make a profit -before income taxes and interests on loans taken-. It turns to be a disappointment compared to similar stocks.
  • In past years, profits -before income taxes- grew at an extremely fast speed. It was bottom tier against rivals.
  • In the previous years, growth trend on total net profit has been extremely high, and last-in-rank when measured against peer companies.
  • Earnings per share have grown at an extremely fast rhythm in past years. It's been a disappointment compared to industry peers.

Miscellaneous score: 9.0

  • ARCC managed to pay no income taxes on profits made in the past years, sometimes even got a credit. It's been somewhat better than peers.
  • The company does not report R&D expenses. It's meaningless to measure in relation to competitors.
  • We have insufficient data to estimate how effective is research and development effort. It stands unknown against rival companies.

Profitability score: 7.5

  • Ares Capital Corporation usually gets very good returns on the resources it controls. It proves almost average when measured against peer firms.
  • The company normally gets good proceeds -on the resources directly invested in the business-. They remain close to average when compared to similar companies.
  • There's usually abundant profitability -in relation to owned resources-. It ranks similar to competitors.
  • In the past, got good returns -on the tangible resources it controls-. This metric is usually related to the industry in which operates and combines profitability versus reinvestment needs. It's almost average when measured against comparable enterprises.

Usage of Funds score: 3.3

  • ARCC on average doesn't generate genuine funds, so to buy or replace property, plants and equipment must either burn existing cash or increase debt. It stands almost average when measured against rival firms.
  • The company is usually not replacing property, plant, and equipment that gets old, instead using funds in something else. It can't keep forever, which is last-in-rank when measured against industry peers.
  • In the past twelve months it paid outstanding dividends, considering the current stock price. It came somewhat better than competitors.
  • In recent years, has cut back dividend payments. It could be traversing challenging times. The company has behaved lacking compared to similar firms.
  • The company generates very few genuine funds. Dividend payments are usually on borrowed money, which isn't sustainable in the long run. Unless business prospects improve greatly, future payments could be at risk. Sustainability looks bottom tier against comparable companies.
  • The company usually enlarges quite a bit the pool of investors, resulting in more mouths feeding on the pie of profits. It remains lacking compared to peer enterprises.
  • Repurchase effectiveness metric is very complex. Run again in analytical mode if you're interested in a technical explanation. It stands in a very weak position compared to rivals.
  • We do not have sufficient data to comment on buybacks and their sustainability. It still looks dubious against competitors.

Balance Sheet score: 8.4

  • Ares Capital Corporation has no intangible assets (like brands and goodwill) according to accounting books, which is safest. It happens to be top tier when measured against peer companies.
  • Current ratio remains a mystery, as there was not sufficient Balance Sheet information. It turns to be unidentifiable against similar firms.
  • Almost no resources controlled were provided for with financial debt. Financial strength is great. Company could significantly increase debt if it wished so, to reinvest in business, to buy a smaller company or to reward stockholders. It remains mediocre against rival firms.
  • A substantial portion of resources controlled are already cash or short-term investments, which is better for liquidity. It looks weak when measured against rivals.
  • Quick ratio is unavailable at this moment, due to lacking data. It's a pity we cannot compare it with peer firms.
  • A conclusion on cash ratio could not be reached, as we lack inputs, which is unfortunate when trying to measure against similar enterprises.
  • Usually, sales are on a two-months credit. It still ranks encouraging in relation to peers.
  • Days of inventory outstanding are not known. It comes up as a big question mark against competitors.
  • We could not gauge the normal operating cycle of the company. It happens to be a mystery against peers.
  • Unfortunately, we had not enough data to estimate the days of payables outstanding. It ranks unknown against industry peers.
  • Cash conversion cycle remains unknown, due to not having enough inputs. It's incomparable against similar companies.
  • Company earns net interest income on its investments and therefore is in a quite comfortable financial position. It stands top-notch against rival firms.
  • Business earnings have usually been great when measured against loans taken. Debt might be repaid almost as soon as desired. It ranks below average when measured against comparable enterprises.
  • Revenues are huge in relation to property, plant, and equipment required to operate. This metric is likely dependent on the industry the company operates in. Low property, plant, and equipment requirements, allows the company to keep more money to reward stockholders in the long run. It looks impressive in relation to similar firms.
  • Resource exploitation is very low when yearly sales are considered, business volume must be greatly increased. This metric is normally tied to the industry where the firm belongs. It's still somewhat worse than peer companies.

Valuation score: 6.4

  • Ares Capital Corporation has an unknown adjusted Price-to-Earnings ratio, so we cannot comment on that. It happens to be a necessary comparison against competitors.
  • Price-to-Tangible-Book-Value is a fairly complex metric. Run again in analytical mode if you're interested in a technical explanation. It remains rather normal in relation to peers.
  • There is insufficient information on the genuine funds generation capability showed in the past twelve months, which stands as an incognita in relation to similar companies.
  • Unfortunately, lack of enough yearly data impaired our ability to estimate the normal earnings power. It's still an unknown variable to measure against industry firms.
  • In the past twelve months, the company has enlarged the pool of investors by issuing new shares. Future profits need to be high enough to justify the measure, as the pie of earnings will now be split among somewhat more stockholders. It came up in a very weak position compared to peer ventures.
  • We are unsure on the relationship between net financial position and market capitalization of the stock. It looks we will not be able to reach a conclusion regarding similar enterprises.
  • Considering the past twelve months, traditional Price-to-Earnings relation looks cheap. Possible reasons are that the market might be betting current earnings will be hard to sustain through time, or that the company has very high fund needs, or a weak financial position, among others. If that isn't the case, the current stock price might be attractive. It ranks more than average in relation to peer companies.
  • Comparing the current stock price with the past twelve-months revenues gives a very high relationship. This is an important metric to check its evolution through time, and to compare to industry peers. It looks lacking compared to rival firms.
  • The relation between the stock price and accounting book value might be more than reasonable. It's important both to check this metric through time and to compare it with rival companies. The company remains slightly better than peer firms.
  • We could not gauge an alternative metric of earnings power of the past twelve months. It happens to be an interesting metric to relate to industry peers.
  • An alternate metric on the usual genuine-funds generation ability could not be provided. It's still unknown against peer companies.

Total score: 6.6


ARCC logos

Company at a glance: Ares Capital Corporation (ARCC)

Sector, industry: Financial Services, Asset Management

Market Cap: 8.87 billions

Revenues TTM: 1.56 billions

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.

Awarener score: 4.4

Conclusion

The higher the Awarener score, the more bang you get for the buck. It measures how much genuine funds the company generates for the stock price paid (could not be estimated), the business stability (Lacking) and growth (Modest), and the company's inclination to return cash to the stockholders (Lacking).