Ares Capital Corporation Fundamental Analysis (NASDAQ: ARCC)
Ares Capital Corporation Fundamental Analysis (NASDAQ: ARCC)
Ares Capital Corporation (NASDAQ: ARCC) shows moderate financial fundamentals with a PE ratio of 15.97, profit margin of 36.16%, and ROE of 6.23%. The company generates $2.4B in annual revenue with weak year-over-year growth of -5.28%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 34.4/100 based on profitability, valuation, growth, and balance sheet metrics. The F grade reflects weak fundamentals and significant financial concerns.
Fundamental Health Score
We analyze ARCC's fundamental strength across five key dimensions:
Efficiency Score
WeakARCC struggles to generate sufficient returns from assets.
Valuation Score
ExcellentARCC trades at attractive valuation levels.
Growth Score
WeakARCC faces weak or negative growth trends.
Financial Health Score
ModerateARCC shows balanced financial health with some risks.
Profitability Score
ModerateARCC maintains healthy but balanced margins.
Key Financial Metrics
Is ARCC Expensive or Cheap?
P/E Ratio
ARCC trades at 15.97 times earnings. This indicates a fair valuation.
PEG Ratio
When adjusting for growth, ARCC's PEG of -0.41 indicates potential undervaluation.
Price to Book
The market values Ares Capital Corporation at 1.01 times its book value. This may indicate undervaluation.
EV/EBITDA
Enterprise value stands at -0.19 times EBITDA. This is generally considered low.
How Well Does ARCC Make Money?
Net Profit Margin
For every $100 in sales, Ares Capital Corporation keeps $36.16 as profit after all expenses.
Operating Margin
Core operations generate 65.25 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $6.23 in profit for every $100 of shareholder equity.
ROA
Ares Capital Corporation generates $2.86 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Ares Capital Corporation generates strong operating cash flow of $1.76B, reflecting robust business health.
Free Cash Flow
Ares Capital Corporation generates strong free cash flow of $1.76B, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $2.43 in free cash annually.
FCF Yield
ARCC converts 12.45% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
15.97
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
-0.41
vs 25 benchmark
P/B Ratio
Price to book value ratio
1.006
vs 25 benchmark
P/S Ratio
Price to sales ratio
5.81
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
1.08
vs 25 benchmark
Current Ratio
Current assets to current liabilities
1.14
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.06
vs 25 benchmark
ROA
Return on assets percentage
0.03
vs 25 benchmark
ROCE
Return on capital employed
0.05
vs 25 benchmark
How ARCC Stacks Against Its Sector Peers
| Metric | ARCC Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 15.97 | 20.35 | Better (Cheaper) |
| ROE | 6.23% | 610.00% | Weak |
| Net Margin | 36.16% | 641.00% | Weak |
| Debt/Equity | 1.08 | 0.91 | Neutral |
| Current Ratio | 1.14 | 799.65 | Neutral |
| ROA | 2.86% | -77.00% (disorted) | Weak |
ARCC outperforms its industry in 1 out of 6 key metrics, but lagging in ROE.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Ares Capital Corporation's 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
58.50%
Industry Style: Value, Dividend, Cyclical
High GrowthEPS CAGR
62.80%
Industry Style: Value, Dividend, Cyclical
High GrowthFCF CAGR
-5.62%
Industry Style: Value, Dividend, Cyclical
Declining