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Ares Capital
(NASDAQ:ARCC)
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Rating:70Outperform
Price Target:
$20.50
▲(2.86% Upside)
Action:Upgraded
Date:10/27/26
The score is driven primarily by strong profitability/cash generation and a constructive earnings outlook with stable credit performance and improved funding. Valuation is supportive due to the high dividend yield and reasonable P/E. These positives are tempered by softer technical momentum and the need to monitor leverage and near-term growth/origination conditions.
Positive Factors
Strong cash generation
TTM operating and free cash flow of about $1.82 billion, with free cash flow roughly matching net income and rebounding 71%, indicates strong conversion of reported earnings into cash. That supports recurring distributions, portfolio reinvestment and resilience through normal credit cycles.
Negative Factors
Meaningful leverage
Leverage around 1.0x to 1.3x debt-to-equity amplifies both portfolio returns and the impact of credit deterioration. Although described as workable, this debt burden reduces balance-sheet flexibility, raises funding sensitivity and can constrain investment capacity during stress.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong cash generation
TTM operating and free cash flow of about $1.82 billion, with free cash flow roughly matching net income and rebounding 71%, indicates strong conversion of reported earnings into cash. That supports recurring distributions, portfolio reinvestment and resilience through normal credit cycles.
Read all positive factors
Ares Capital (ARCC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$13.29B
Dividend Yield10.37%
Average Volume (3M)4.53M
Price to Earnings (P/E)15.2
Beta (1Y)0.73
Revenue Growth10.38%
EPS Growth-34.10%
CountryUS
Employees4,250
SectorFinancial
Sector Strength70
IndustryAsset Management
Share Statistics
EPS (TTM)1.22
Shares Outstanding718,022,800
10 Day Avg. Volume3,718,329
30 Day Avg. Volume4,533,050
Financial Highlights & Ratios
PEG Ratio-0.46
Price to Book (P/B)0.99
Price to Sales (P/S)6.31
P/FCF Ratio12.38
Enterprise Value/Market Cap2.10
Enterprise Value/Revenue11.54
Enterprise Value/Gross Profit16.81
Enterprise Value/Ebitda15.99
Forecast
1Y Price Target
$20.21Price Target Upside1.43% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering7
EPS Forecast (FY)1.91
Revenue Forecast (FY)$3.10B
Ares Capital Business Overview & Revenue Model
Company Description
Ares Capital Corporation (ARCC) operates as a Business Development Company (BDC), delivering diverse financing solutions predominantly to middle-market enterprises. The firm's expertise lies in facilitating various corporate actions, including fun...
How the Company Makes Money
ARCC makes money primarily by earning investment income on the capital it deploys into middle-market companies. Its core revenue stream is interest income from debt investments, especially senior secured loans, which typically pay periodic interes...
Ares Capital Earnings Call Summary
Earnings Call Date:Oct 27, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Feb 10, 2027
Earnings Call Sentiment Positive
The call was predominantly positive. ARCC reported solid earnings, stable credit performance, strong liquidity, improved funding costs, a durable dividend and a strategically attractive MFIC acquisition expected to be modestly accretive. The primary challenges were a slower and more selective origination environment, lower capital structuring fees, a slightly lower portfolio fair value and uncertainty around future MFIC asset marks. Highlights significantly outweighed lowlights.Positive Updates
Solid Quarterly Earnings and Return on Equity
Third-quarter core earnings were $0.46 per share, representing an annualized return on equity of approximately 9.5%. GAAP net income per share was $0.44, up from $0.24 in the second quarter, primarily due to net unrealized appreciation from mark-to-market improvements on investments.
Negative Updates
Slower Third-Quarter Origination Environment
Macroeconomic shifts, geopolitical developments, volatility around interest rates, inflation and global trade reduced visibility and elongated M&A processes. Combined with ARCC's continued selectivity, these factors resulted in a more modest pace of new investment activity during the third quarter.
Read all updates
Q3-2026 Updates
Positive
Negative
Solid Quarterly Earnings and Return on Equity
Third-quarter core earnings were $0.46 per share, representing an annualized return on equity of approximately 9.5%. GAAP net income per share was $0.44, up from $0.24 in the second quarter, primarily due to net unrealized appreciation from mark-to-market improvements on investments.
Read all positive updates
Company Guidance
Management expects the MFIC transaction to be “modestly accretive to core earnings per share,” with accretion driven by the discount and higher yield on the assets and ARCC’s cost of capital advantages; ARCC expects to close the transaction in “5 or 6 months,” and said its $750 million upsized Wells Fargo-led funding commitment provides sufficient capacity without the need for additional debt capital. In the fourth quarter, ARCC has closed on $1.1 billion and its investment backlog stands at approximately $2.5 billion; every 100 basis point increase in base rates is expected to create about $0.02 per share of earnings tailwind per quarter, with changes typically taking about a quarter to be fully reflected in earnings. ARCC continues to believe its current regular dividend appropriately reflects the underlying earnings power, with the fourth quarter 2026 regular dividend of $0.48 per share payable on December 29, and is targeting leverage of 0.9x to 1.25x. Management said a 1% base rate increase is manageable, portfolio companies can handle “1% and more,” and any stress at the tail end would not be a meaningful contributor; 2028 maturities are about 10% and 2029 maturities are about 13% of the portfolio.Ares Capital Financial Statement Overview
Summary
Income Statement
72
Positive
Balance Sheet
64
Positive
Cash Flow
76
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 2.42B | 2.24B | 2.37B | 2.17B | 1.20B | 2.05B |
| Gross Profit | 1.66B | 1.51B | 1.71B | 1.64B | 741.00M | 1.68B |
| EBITDA | 1.75B | 1.40B | 1.59B | 1.54B | 655.00M | 1.60B |
| Net Income | 875.00M | 1.30B | 1.52B | 1.52B | 600.00M | 1.57B |
Balance Sheet | ||||||
| Total Assets | 30.60B | 31.23B | 28.25B | 23.80B | 22.40B | 20.84B |
| Cash, Cash Equivalents and Short-Term Investments | 722.00M | 924.00M | 635.00M | 535.00M | 303.00M | 372.00M |
| Total Debt | 15.12B | 15.99B | 13.76B | 11.95B | 12.38B | 11.16B |
| Total Liabilities | 16.65B | 16.92B | 14.90B | 12.60B | 12.84B | 11.97B |
| Stockholders Equity | 13.95B | 14.32B | 13.36B | 11.20B | 9.55B | 8.87B |
Cash Flow | ||||||
| Free Cash Flow | 1.75B | 1.14B | 1.28B | 1.00B | 746.00M | 935.00M |
| Operating Cash Flow | 1.75B | 1.14B | 1.28B | 1.00B | 746.00M | 935.00M |
| Investing Cash Flow | -602.00M | -2.86B | -3.41B | -489.00M | -2.10B | -3.39B |
| Financing Cash Flow | -1.46B | 1.78B | 2.42B | -284.00M | 1.21B | 2.62B |
Ares Capital Technical Analysis
Negative
19.93
Price Trends
19.09
Negative
18.73
Negative
18.31
Positive
Market Momentum
-0.14
Negative
43.17
Neutral
38.97
Neutral
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 19.93 is above the 20-day moving average (MA) of 18.68, above the 50-day MA of 19.09, and above the 200-day MA of 18.31, indicating a neutral trend. The MACD of -0.14 indicates Negative momentum. The RSI at 43.17 is Neutral, neither overbought nor oversold. The STOCH value of 38.97 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ARCC.
Ares Capital Risk Analysis
Ares Capital disclosed 57 risk factors in its most recent earnings report. Ares Capital reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Ares Capital Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $5.05B | 10.90 | 14.81% | 8.01% | 3.49% | -18.26% | |
74 Outperform | $1.64B | 18.12 | 0.02% | 10.46% | -17.25% | -53.04% | |
70 Outperform | $13.29B | 15.17 | 6.23% | 10.37% | 10.38% | -34.10% | |
70 Outperform | $5.01B | 18.14 | 3.95% | 13.58% | 1.32% | -62.13% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
63 Neutral | $5.38B | 18.19 | 4.78% | 13.33% | -14.94% | -55.20% | |
54 Neutral | $2.95B | -7.90 | -6.65% | 19.14% | -35.39% | -272.02% |
* Financial Sector Average
ARCC
Ares Capital
18.51
-0.14
-0.74%
MAIN
Main Street Capital
54.04
0.61
1.14%
TSLX
Sixth Street Specialty Lending
17.21
-3.46
-16.74%
FSK
FS KKR Capital
10.66
-2.16
-16.85%
OBDC
Blue Owl Capital
10.16
-1.39
-12.01%
BXSL
Blackstone Secured Lending Fund
23.11
-0.74
-3.10%
Ares Capital Corporate Events
Business Operations and StrategyM&A TransactionsPrivate Placements and Financing
Ares Capital announces acquisition of MidCap Financial Investment
Positive
Oct 27, 2026
On October 26, 2026, Ares Capital entered into a definitive agreement to acquire MidCap Financial Investment Corporation in a stock‑and‑cash merger that values MFIC at about $2.6 billion and offers $10.88 per fully diluted share, a rou...
DividendsFinancial Disclosures
Ares Capital Reports Softer Q3 Earnings, Steady Dividend
Neutral
Oct 27, 2026
On October 27, 2026, Ares Capital Corporation reported third-quarter 2026 results showing GAAP net income of $319 million, or $0.44 per share, and core EPS of $0.46, down from $0.57 and $0.50, respectively, in the prior-year quarter. Net investmen...
Business Operations and StrategyPrivate Placements and Financing
Ares Capital Issues $750 Million Unsecured Notes Offering
Positive
Sep 15, 2026
On September 15, 2026 Ares Capital Corporation completed the issuance and sale of $750 million aggregate principal amount of 6.250% unsecured notes due 2033 under an existing indenture with U.S. Bank Trust Company, N.A. as trustee. The notes pay s...
Business Operations and StrategyPrivate Placements and FinancingShareholder Meetings
Ares Capital Stockholders Approve Below-NAV Share Issuance
Positive
Aug 14, 2026
On August 13, 2026, Ares Capital Corporation held a special meeting of stockholders to vote on a proposal affecting its capital-raising flexibility. The meeting covered 718,022,845 outstanding common shares eligible to vote, based on the record da...
DividendsFinancial Disclosures
Ares Capital Reports Q2 2026 Results, Declares Dividend
Neutral
Jul 29, 2026
On July 29, 2026, Ares Capital Corporation reported financial results for the second quarter ended June 30, 2026, showing GAAP net income of $171 million, or $0.24 per share, and net investment income of $359 million, or $0.50 per share. The firm&...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.