Ares Capital Corporation
🇺🇸 ARCC · NYSE/NASDAQ · US04010L1035
Bank
USD 17.68 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
9.5
P/E (Price-to-Earnings)Shows how much investors pay for each $1 of profit. We display the TTM P/E (Trailing Twelve Months) which uses actual earnings from the last 4 quarters. This is more reliable than Forward P/E which uses analyst estimates.
Calculation: 17.68 ÷ 1.86 = 9.5
TTM period through: 2025-12-31
Forward P/E (estimated): 9.3
Based on analyst estimates
Reference: Provider P/E (Trailing): 9.4
Yield (Fwd)
10.86%
Dividend YieldThe Forward yield (Fwd) shows the next announced annual dividend / current price — what you'd earn going forward. The Trailing yield (TTM) in the tooltip shows dividends actually paid in the last 12 months. Forward is shown as primary because it reflects the company's current commitment to shareholders.
Trailing Yield (TTM): 10.71%
Net Debt/EBITDA (TTM)
6.9x
Latest quarter: 28.5x
Net Debt / EBITDAA leverage ratio showing how many years of EBITDA (earnings before interest, taxes, depreciation, and amortization) it would take to repay net debt. EBITDA approximates operating cash generation. Lower ratios (e.g., <3x) are generally safer; higher (e.g., >5x) may indicate more financial risk.
TTM through: 2025-12-31
Latest quarter (2025-12-31): 28.5x
The quarterly value can spike when quarterly EBITDA is very low (e.g., one-time charges).
Quick guide: <2x manageable, >4x can be risky (sector-dependent).
Payout (TTM)
20.6%
Payout RatioDividends as a percentage of earnings. The Forward payout (Fwd) uses the announced dividend divided by actual past earnings (TTM) — it tells you if the company can afford what it promised. Very high payouts can be risky, especially if profits fall.
Cash Flow Payout (TTM): 23.5%
FCF Coverage (TTM): 4.26x
ROE
9.4%
ROE (Return on Equity)A profitability measure: how much profit is generated from shareholders’ equity. Higher isn’t always better if it comes from high debt.
EV/EBITDA
10.2x
EV/EBITDAA valuation ratio that compares total business value (including debt) to EBITDA. Lower can mean cheaper, but context matters.
Summary
Ares Capital Corporation is the premier business development company (BDC), providing essential financing to middle-market businesses with a flawless 10-year dividend history. The recent 10% stock decline, driven by cyclical interest rate fears, creates an opportunity with the stock trading at an attractive P/E of 9.5 and a discount to book value (P/B 0.86). Worth considering for new positions at current levels below $18, offering an exceptional 10.7% yield that remains fundamentally well-covered by free cash flow.
Sector Context
As a Business Development Company (BDC) operating in the financial sector, Ares Capital is legally required to distribute at least 90% of its taxable income to shareholders, making its 96% payout ratio completely normal and expected. Furthermore, a Debt/Equity ratio of 1.12 is considered highly conservative and safe for this specific business model.
Temporary Opportunity Identified
The stock has declined 10.4% over the past 6 months due to cyclical market fears regarding anticipated Federal Reserve interest rate cuts, which investors worry will compress yields on Ares Capital's floating-rate loans.
📊 Strategy Analysis
- • Trading at a highly attractive P/E of 9.52 and a Price-to-Book of 0.86, representing a discount to intrinsic value.
- • Exceptional dividend reliability with a 10.71% yield, backed by a flawless 10-year track record with zero cuts and strong Free Cash Flow coverage (4.26x).
- • Conservative leverage for a financial entity with a Debt/Equity ratio of 1.12, providing strong balance sheet resilience during economic uncertainty.
- • Robust long-term revenue growth, boasting a 15.6% 10-year CAGR, demonstrating consistent market share expansion in middle-market lending.
⚠ What to Watch
- • Anticipated Federal Reserve interest rate cuts could compress yields on the company's floating-rate loan portfolio, impacting Net Investment Income.
- • The 5-year EPS CAGR shows a 12.0% decline, reflecting pressure from cyclical interest rate dynamics and macroeconomic volatility.
- • As a middle-market lender, the underlying loan portfolio carries inherent corporate credit risk if recent geopolitical tensions and oil shocks trigger a broader economic slowdown.
📊 Historical Trends (10 Years)
Powered by EODHDThese charts show how key metrics have evolved over the past decade, helping you identify if the company is improving or deteriorating.
Debt Evolution (Net Debt / EBITDA)
Lower values are better. A declining trend indicates the company is reducing its debt (deleveraging).
Revenue & Earnings Growth
Consistent growth in revenueRevenue
The money a company brings in from selling its products or services. It’s the top line before costs. (blue) and earningsEarnings (Profit)
What’s left after expenses. Positive earnings mean the business made a profit; negative means a loss. (green) indicates a healthy business. Look for upward trends and recoveries after temporary dips.
Dividend Sustainability (FCF vs Dividends Paid)
Free cash flowFree Cash Flow
Cash left after the company pays for running the business and maintaining it. Often used to fund dividends, pay debt, or buy back shares. (FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., blue) should cover dividends paidDividends Paid
Cash the company paid out to shareholders. It’s not guaranteed and can change over time. (green). If dividends consistently exceed FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., the dividend may be at risk.
Analysis date: 2026-03-29
Disclaimer: This information is for educational purposes only. Not financial advice.