Ares Capital (NASDAQ:ARCC) Trading Up 0.4% - What’s Next?

Ares Capital Co. (NASDAQ:ARCC) shares experienced a slight increase of 0.4% on Tuesday, closing at $22.25 after hitting a high of $22.26 during the day. The trading volume was about 885,830 shares, which is significantly lower than the average daily volume of approximately 4,487,799 shares. The stock previously closed at $22.16, indicating a modest upward trend.

Wall Street Analyst Opinions

ARCC has garnered attention from various analysts, leading to a mix of ratings and price target adjustments. For instance, Keefe, Bruyette & Woods revised their price target for Ares Capital from $22.00 to $23.00 while maintaining an "outperform" rating. Similarly, on February 3rd, JPMorgan Chase & Co. increased their target price from $23.00 to $24.50, also awarding the stock an "overweight" rating.

Conversely, Raymond James downgraded Ares Capital from an "outperform" to a "market perform" rating on February 6th, while StockNews.com issued a cautionary note, lowering their rating from "hold" to "sell." Royal Bank of Canada, on the other hand, has a more favorable view, raising their price target from $23.00 to $24.00, supporting an "outperform" rating. Overall, the consensus rating remains a "Moderate Buy" according to MarketBeat, with an average target price of approximately $22.94.

Current Financials

Ares Capital shows a solid current ratio of 1.21 and a quick ratio of 1.21, indicating good short-term financial stability. The company's debt-to-equity ratio stands at 1.03, showing a balanced approach to leveraging. The market capitalization of Ares Capital is reported at $15.17 billion, featuring a price-to-earnings (PE) ratio of 9.05, with a beta of 1.00, illustrating market volatility in line with the broader market.

In their latest quarterly earnings report on February 5th, Ares Capital announced earnings of $0.55 per share, which fell short of Wall Street's consensus estimate of $0.58 by $0.03. The company reported a return on equity of 11.54% and a net margin of 50.90%. Analysts anticipate that Ares Capital will report earnings of $2.19 per share for the current fiscal year, reflecting ongoing confidence in the company’s profitability.

Ares Capital and Dividends

Recently, Ares Capital declared a quarterly dividend of $0.48 per share, distributed on March 31st. This dividend was issued to shareholders on record as of March 14th, with the ex-dividend date also falling on March 14th. Annually, this translates to a total dividend of $1.92, equating to an attractive dividend yield of 8.66%. The company maintains a dividend payout ratio of 78.37%, indicating a steady approach to returning capital to shareholders.

Institutional Interest

Interest from institutional investors in Ares Capital has been notable. The Manufacturers Life Insurance Company increased its stake by 25.1% in the third quarter, totaling 222,101 shares valued at around $4.65 million. BNP Paribas Financial Markets also expanded their shareholding significantly, increasing it by 331.6%, resulting in ownership of 178,224 shares worth approximately $3.73 million. Other institutional actions include new positions by Verition Fund Management LLC and Erste Asset Management GmbH during the same period. Currently, institutional investors hold about 27.38% of Ares Capital’s shares.

Ares Capital's Business Profile

Ares Capital Corporation operates as a business development company, focusing on various forms of financing, including acquisition, recapitalization, mezzanine debt, rescues, and leveraged buyouts primarily targeting middle-market companies. The firm also considers investments in growth capital and general refinancing efforts in sectors such as manufacturing, business services, consumer products, healthcare, and information technology.

Conclusion

In conclusion, while Ares Capital continues to show promise with modest stock gains and a solid dividend yield, potential investors should consider recent ratings and financial performance reports in their decision-making process.

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