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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
Ares Capital Corporation (XNAS:ARCC) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
ARCC
Name:
ARES CAPITAL CORPORATION (XNAS:ARCC)
Sector:
481.00M
Industry:
Asset Management
CEO:
Mr. Robert deVeer
Total Employees:
2,100
Our Technological Advancement Rating
Our Rating:
-
-
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF ARES CAPITAL CORPORATION(ARCC) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND ASSET MANAGEMENT INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
19.3
One Month Price Target:
$19.41
Six Month Price Target :
$19.95
Likely Price in One Year's Time:
Ticker:
$20.61
Likely Trading Range Today Under (Normal Volatility)
$19.22
Price Upper limit ($) :
$19.39
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$18.28
This week:
$17.01
This month :
$14.72
Other Primary facts
Market Cap:
9.70B
Market Cap Classification:
Mid Cap
Number of Shares
IPO Date:
505.44M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
22.15%
-23.55%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$24.05
$21.87
$14.55
$16.73
Medium risk (<10%) entry points
Buy Call
Sell Call
$21.17
Buy Put:
Sell Put:
$20.70
$17.43
$17.90
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
ARCC
Sharpe Ratio:
1.09%
Comparison:
ARCC, is amongst the top 60% stocks with highest risk-adjusted returns
Sharpe ratio is 34.94% higher than the industry
& is -52.40% lower than the market/S&P 500 average
Average Returns/Yield of
ARCC
Daily returns:
0.04%
Weekly returns:
0.19%
Monthly returns:
0.74%
Yearly returns:
9.18%
Comparison of returns:
Average annual returns/yield (last 3 years) is -3.15% below industry average
Classification:
ARCC, is amongst the top 60% highest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.75
Statistical test of Returns:
ARCC has yielded returns statistically similar to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
2.60%
Weekly Volatility:
5.81%
Monthly Volatility:
11.63%
Yearly Volatility:
40.28%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
1.09%
Volatility in last five trading days has been -58.27% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-5.30%
Weekly VaR:
-11.86%
Monthly VaR:
-23.71%
How Much Can the price of
ARCC
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-21%
Worst case (decline):
-82.14%
This translates to price declining to:
$15.33
This translates to price declining to:
$3.45
Severe Crash Probability
Risk of crash in next 6/12 months: Medium (<50%)
What is Value at Risk (VaR)?
Risk Fundamentals
ARCC is a 67.36% riskier investment compared to the market/S&P 500 & is 43.38% riskier than Nasdaq (IXIC)
Risk (measured by volatility) is 0.04% above industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
ARCC
Beta in relation to market/S&P 500--1.01
Expected beta in 1 year's time:
0.821
Expected beta in 3 year's time:
1.161
Unlevered (debt free) Beta:
0.478
Beta in relation to Nasdaq (XNAS):
0.688
Beta in relation to all global stocks::
0.797
Beta Comparison & Analysis
Beta of competitors/peers::
1.11
Beta is -9.30% lower than peers
Average Industry Beta:
1.694
Beta is -40.59% below industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
0.09%
Sustainable growth rate is -99.69% below industry average
Alpha provided | Alpha Analysis
Alpha provided:
-0.012
Alpha is -79.34% below industry average alpha yield
Alpha is -73% below the market average
Analysis of Cost of Capital of
ARCC
Equity cost of capital:
0.100
Equity cost of capital is -31.92% below industry mean WACC
Unlevered (without debt) cost of capital:
4.77%
Before-tax cost of debt:
3.56%
After-tax cost of debt:
2.81%
Overall debt rating:
Upper medium A grade (third highest grade),CO8<=0.0429,"Medium BBB grade (Fourth highest grade)
Weighted average cost of capital (WACC):
2.81%
WACC is -14.72% below industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$3.48
Revenue growth rate per share of (3Y):
1.04
Annual revenue growth rate is -62.33% below industry average
EPS:
$3.07
Expected Annual growth rate of EPS (3Y):
23.58%
Expected future EPS growth rate is -15.12% lower than the Asset Management industry
Free cash flow (FCF) per share:
-
Balance sheet equity growth per share: 6.29%
Equity growth rate per share is -70.23% lower than the industry
Debt per share
$21.05
EBITDA per share
$3.66
Valuation Analysis Today of
ARCC
P/E Ratio:
8.76
P/E Ratio of Competitors/Peers:
20.07
P/E ratio is -56.37% lower than main peers & is -45.77% lower than the industry
Stock price/value with industry average P/E ratio: $49.57
ARCC is -61.07% undervalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $43.15
Present value of the expected future dividends only: $19.75
P/S (Price to Sales ratio):
5.54
Price to sales ratio is -19.10% below the industry mean
P/B (Price to book value ratio):
1.04
-
-
Net income growth rate (3Y):
83.50%
Net income growth rate is -42.57% lower than the industry average net income growth rate
Dividend Analysis
Dividend payout rate: 14.80%
Dividend yeild: 8.91%
Previous Dividend: $0.45
Previous adjusted dividend: $0.45
Previous Dividend: $1.72
Expected next dividend best case: $0.47
Expected next dividend worst case: $0.43
Average dividend payment (long-term): $0.41
Average dividend increase/decrease (growth rate) % per period: 1.23%
Expected next dividend payment date: 28/09/2022
Expected next dividend record date: 13/09/2022
-
Previous dividend payment date: 30/06/2022
Previous dividend record date: 15/06/2022
-
Dividend History:
2022-06-14--$0.45
2021-12-14--$0.41
2021-06-14--$0.40
2022-03-14--$0.45
2021-09-14--$0.41
2021-03-12--$0.40
Dividend growth rate is -77.72% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
113.46%
Net debt to equity ratio:
106.05%
Debt to assets ratio:
52.00%
Net debt to assets ratio:
48.60%
Debt-to-asset ratio is -0.51% below industry average
Ability to repay debt:
Interest coverage ratio:
4.88
Interest coverage ratio is -91.79% less than industry average
Looking forward:
Debt growth rate:
30.26%
Annual debt growth is -538% lower than industry average debt growth rate
Debt repayment rate in last quarter: 17.73%
Analysis of Key Statistics
Correlation of price movement with the market:
0.579
Statistical significance of correlation:
ARCC has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.576
Stock price is 0.43% more correlated with the market, compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.576
Correlation of price movement with Nasdaq (^IXIC):
0.038
Covariance of price movement with the market:
0.057
Kurtosis
32.214
Returns have severe fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are considerably more likely, compared to assets with normally distributed returns
Skewness of returns:
-0.674
Returns are left (negative) skewed; mean returns are lower than median and mode returns
Fundamental Analysis & Dupont Analysis of
ARCC
Gross Profit Margin Ratio:
100%
Operating Profit Margin Ratio:
51.64%
Operating profit margin is 9.79% higher than the industry
Net Profit Margin Ratio:
100%
Effective Tax Rate:
2.57%
Effective tax rate is -89.49% lower than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
14.98%
Return on equity (ROE) is -40.74% lower than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
6.87%
Return on assets (ROA) is 17.66% higher than the industry
Financial Leverage:
2.1x
Current Ratio:
1.58
Current ratio is -58.76% below industry average
Cash Conversion Cycle (days):
0
-
The remaining useful life of property plant & equipment is: 10.4 years
Stock based compensation to net income ratio:
-
In-depth Efficiency Analysis
Revenue generated per employee:
838.1K
Each employee generates -40% less revenue than industry average revenue per employee
EBITDA generated per employee:
881.0K
Each employee generates -216% less EBITDA than industry average revenue per employee
Profit generated per employee:
669.0K
Each employee generates -154% less net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
229.0K
Each employee generates -291% less free cash flow than industry average revenue per employee
Assets/Capital per employee
0.0K
Each employee generates -291% less free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
-
-
Competitors/Peer firms of
ARCC
Upstart Holdings Inc (XNAS:UPST)
ERIE INDEMNITY COMPANY (XNAS:ERIE)
OXFORD LANE CAPITAL CORP. (XNAS:OXLCP)
MORINGA ACQUISITION UNT (XNAS:MACAU)
EVO ACQUISITION UNT (XNAS:EVOJU)
COMMERCE BANCSHARES, INC. (XNAS:CBSH)
SEI INVESTMENTS COMPANY (XNAS:SEIC)
PEOPLE'S UNITED FINANCIAL, INC. (XNAS:PBCT)
ZIONS BANCORPORATION, NATIONAL ASSOCIATION (XNAS:ZION)
Current Analyst Ratings
Strong buy�17%
Buy�25%
Hold�17%
Sell�0%
Strong sell�0%
Overall analyst sentiment is: Buy
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
1.76B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
-
467.00M
-
270.00M
270.00M
-
48.00M
318.00M
1.27B
379.00M
29.00M
1.85B
-
1.41B
1.44B
37.00M
1.41B
Statement of Cash Flow
Date:
Period:
-
Differed Income Tax :
-
Stock Based Compensation :
-
Change in Working Capital :
- 181000.00K
Accounts Receivables:
-
Other Working Capital:
-
Other Non-Cash Items:
451.00M
Net Cash Provided by Operating Activities:
481.00M
Investments in PP&E:
-
Net Acquisitions:
-
Purchases of Investments:
-
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
3/31/22
2022
Q1
695.00M
-
695.00M
133.00M
-
-
-
24.00M
-
-
19.49B
-
-
-
20.46B
20.46B
162.00M
-
-
-
-
-
10.64B
-
10.64B
21.73B
11.08B
-
308.00M
-
-
March 31, 2022 at 6:00:00 AM
1.05B
9.38B
20.46B
-
10.64B
9.9B
-
-
-
- 2293000.00K
510.00M
-
- 208000.00K
1.74B
- 253000.00K
-
228.00M
714.00M
486.00M
481.00M
-
481.00M
Our Proprietary Portfolio Rating
Our Rating:
-
Price Forecast/Expected Price in Next 5 Years of
ARCC
2023
2024
2025
2026
2027
$20.71
$42.94
$45.85
$48.95
$52.26