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1. Company Snapshot

1.a. Company Description

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.

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1.b. Last Insights on ARCC

Ares Capital Corporation's recent performance was driven by strong underlying fundamentals, including solid growth in net investment income and total investment income. Despite missing analysts' estimates, the company's defensive posture, increased first-lien exposure, and strong balance sheet position it well for navigating tough economic conditions. The company's stable dividend and impressive performance make it a strong long-term income investment, according to recent analyst insights. Ares Capital's ability to maintain dividend safety and navigate economic challenges is a key positive driver of its recent performance."

1.c. Company Highlights

2. Ares Capital Corporation's Strong Q3 Earnings

Ares Capital Corporation reported stable core earnings of $0.50 per share, in line with analysts' estimates, and GAAP earnings of $0.57 per share, representing a 10% sequential increase. The company's core earnings exceeded its regular quarterly dividend, generating an annualized return on equity of 10%. The total portfolio at fair value at the end of the quarter was $28.7 billion, a 3% increase from the previous quarter. Revenue growth is expected to be 4.8% next year, indicating a stable outlook for the company.

Publication Date: Nov -02

📋 Highlights
  • Core Earnings Exceed Dividend for 20 Consecutive Quarters: Stable core earnings of $0.50/share outperformed the regular dividend, with 10% annualized return on equity.
  • Record Transaction Review Volume: Ares reviewed over $875 billion in transactions over 12 months, a company record, driven by normalized new issue volumes.
  • Net Deployment Doubles to $1.3 Billion: Third-quarter net deployment surged to $1.3 billion, over double Q2, with 60% targeting new borrowers.
  • Portfolio Growth to $28.7 Billion: Total portfolio at fair value rose to $28.7 billion (+3% QoQ), diversified across 587 companies and 25 industries.
  • Strong Credit Quality Metrics: Nonaccruals at cost fell to 1.8% QoQ, while portfolio companies grew EBITDA by over 10% in Q3, double the broadly syndicated market average.

Financial Performance

The company's financial performance was driven by robust net realized gains from the exit of a previously restructured portfolio company and several equity co-investments, resulting in net realized gains of $247 million, representing its second-highest net realized gain quarter since inception. The company's focus on investing in the highest quality credits continues to support strong fundamental credit metrics, with net deployment of $1.3 billion in the third quarter.

Investment Activities

Ares reviewed more than $875 billion in estimated transactions over the last 12 months, a record for the company. The company's investment activities were focused on the highest quality credits, with a net deployment of $1.3 billion in the third quarter, more than double the prior quarter. The company's broad market coverage is underscored by the fact that about 1/4 of its new investments were made in companies with EBITDA below $50 million.

Credit Quality

The company's strong credit quality is evidenced by its declining nonaccruals on a quarter-over-quarter basis, along with net realized and unrealized gains and growth in NAV per share for the third quarter. Nonaccruals at cost ended the quarter at 1.8%, down 20 basis points from the prior quarter. The weighted average organic LTM EBITDA growth of the portfolio companies was over 10% in the third quarter, more than double that of the broadly syndicated market.

Valuation

With a P/E Ratio of 10.15 and a Dividend Yield of 9.43%, the company's valuation appears reasonable, considering its stable core earnings and strong credit quality. The company's ROE of 10.26% is also notable, indicating a strong return on equity. The Net Debt / EBITDA ratio of -0.57 suggests a healthy debt position.

Outlook

The company is seeing healthy transaction activity levels in the fourth quarter, with total commitments for the fourth quarter to date through October 23, 2025, at $735 million and a backlog reaching a new record of $3 billion as of October 23, 2025. As Kort Schnabel mentioned, "We are seeing healthy transaction activity levels in the fourth quarter...and a backlog reaching a new record." This indicates a positive outlook for the company's future performance.

3. NewsRoom

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I Am Betting Big On This Near-Perfect 8%-Yielding Income Machine For Early Retirement

Dec -02

Source: seekingalpha.com

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68 Graham Value All-Star (GVAS) November Dividend Dogs Show 27 'Safer' And 17 Ideal Buys

Dec -02

Source: seekingalpha.com

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Is Ares Capital Stock a Buy Now?

Dec -01

Source: fool.com

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Should You Buy Ares Capital Corporation Stock While It's Below $21?

Dec -01

Source: fool.com

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Ares Capital Corporation $ARCC Shares Sold by Boston Partners

Nov -29

Source: defenseworld.net

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Ares Capital Corporation $ARCC Shares Acquired by Baltimore Washington Financial Advisors Inc.

Nov -27

Source: defenseworld.net

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The Smartest Dividend Stocks to Buy With $3,000 Right Now

Nov -27

Source: fool.com

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Ares Capital: Spillover Income Limits Dividend Risk

Nov -27

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.90%)

6. Segments

Investment and Related Activities

Expected Growth: 9.9%

Ares Capital Corporation's 9.9% growth in Investment and Related Activities is driven by increasing demand for middle-market financing, expansion of its investment portfolio, and strategic partnerships. Additionally, the company's ability to originate and syndicate new investments, coupled with its strong balance sheet and access to capital, have contributed to its growth momentum.

7. Detailed Products

Senior Secured Loans

Ares Capital Corporation provides senior secured loans to middle-market companies, offering a flexible and customized financing solution to meet their capital needs.

Unitranche Loans

Ares Capital offers unitranche loans, which combine senior and subordinated debt into a single loan facility, providing a simplified and efficient financing solution.

Second Lien Loans

Ares Capital provides second lien loans, which offer a lower-cost financing option for companies with existing senior debt, allowing them to access additional capital.

Subordinated Debt

Ares Capital offers subordinated debt, which provides a flexible and patient source of capital for companies, allowing them to achieve their long-term goals.

Equity Co-Investments

Ares Capital makes equity co-investments alongside its debt investments, providing companies with a comprehensive financing solution.

8. Ares Capital Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Ares Capital Corporation operates in the financial services industry, which has a moderate threat of substitutes. While there are alternative investment options available, Ares Capital's diversified portfolio and expertise in middle-market lending provide a competitive advantage.

Bargaining Power Of Customers

Ares Capital Corporation's customers are primarily middle-market companies, which have limited bargaining power due to their smaller size and reliance on Ares Capital's financing solutions.

Bargaining Power Of Suppliers

Ares Capital Corporation's suppliers are primarily investment banks and other financial institutions, which have limited bargaining power due to the competitive nature of the financial services industry.

Threat Of New Entrants

The threat of new entrants in the middle-market lending industry is low due to the significant barriers to entry, including regulatory requirements and the need for specialized expertise and scale.

Intensity Of Rivalry

The intensity of rivalry in the middle-market lending industry is moderate, with several established players competing for market share. However, Ares Capital Corporation's diversified portfolio and expertise provide a competitive advantage.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 51.62%
Debt Cost 4.50%
Equity Weight 48.38%
Equity Cost 9.05%
WACC 6.70%
Leverage 106.70%

11. Quality Control: Ares Capital Corporation passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Main Street Capital

A-Score: 7.5/10

Value: 4.8

Growth: 6.0

Quality: 7.6

Yield: 9.0

Momentum: 8.0

Volatility: 9.3

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Ares Capital

A-Score: 7.3/10

Value: 6.7

Growth: 5.1

Quality: 8.0

Yield: 10.0

Momentum: 4.0

Volatility: 10.0

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Golub Capital BDC

A-Score: 7.1/10

Value: 6.7

Growth: 5.8

Quality: 7.9

Yield: 10.0

Momentum: 2.5

Volatility: 10.0

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Hercules Capital

A-Score: 6.7/10

Value: 6.0

Growth: 3.6

Quality: 6.8

Yield: 10.0

Momentum: 4.0

Volatility: 9.7

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Victory Capital Holdings

A-Score: 6.4/10

Value: 4.7

Growth: 6.7

Quality: 8.4

Yield: 6.0

Momentum: 6.0

Volatility: 6.7

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Corebridge Financial

A-Score: 5.6/10

Value: 6.0

Growth: 3.3

Quality: 3.2

Yield: 8.0

Momentum: 6.0

Volatility: 7.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

21.02$

Current Price

21.02$

Potential

-0.00%

Expected Cash-Flows