Ares Capital’s (ARCC) “Buy” Rating Reaffirmed at National Securities
Ares Capital (NASDAQ:ARCC)‘s stock had its “buy” rating restated by equities research analysts at National Securities in a report issued on Tuesday. They currently have a $19.00 price target on the investment management company’s stock. National Securities’ price target would suggest a potential upside of 14.67% from the stock’s current price.
The analysts wrote, “• We had previously stated in our 1Q18 earnings note that Ares received Board approval to lower asset coverage. The company only discussed that they were continuing to evaluate options.
• We thus continue to expect a leverage passage increase sooner rather than later. Ares discussed in a press release last month on 4/2/18 that they intend to recommend moving ahead the recommendation to utilize the flexibility the new BDC leverage limitations provides.
• We think that given ARCC’s UMM focus along with utilization of the SDLP via expansion of the 30% basket under such a scenario make perfect sense for Ares.
• The ability to source and purchase significant amounts of low yielding, safer UMM credits that might only currently work in the JV but could potentially augment the balance sheet investments and would be simple for Ares as it has the ability to purchase substantial amounts of these loans and it does not deviate from the area of Ares’ primary focus currently in terms of large UMM borrowers. The sponsor relationships the company has also speak to the potential for Ares to originate more loans.
• We think that given the size of Ares, consistency of returns, and shareholder friendly actions carried out by the company to this point that it is also possible that they lower management fees, although we do not model that into our assumptions.
• Reduced fees would also portend to management getting votes to expedite when the increased leverage is available as we think cutting fees concomitant with increasing leverage so that more of the benefits flow through to shareholders would induce shareholders to vote yes. Being the largest public BDC currently, Ares also has significant institutional shareholder ownership relative to the sector who would more readily understand these benefits, in our opinion.
• As such we are making no changes to our estimates at this time given we think of all companies, the potential to go above 1:1 would work best for Areas given increasing the 30% basket and thus SDLP further and already doing larger, UMM loans hereupon what is currently passed on for price could make the ROE work.”
Several other equities research analysts also recently commented on the company. Zacks Investment Research downgraded Ares Capital from a “hold” rating to a “sell” rating in a report on Wednesday, February 7th. JPMorgan Chase raised their target price on Ares Capital from $16.50 to $17.00 and gave the company an “overweight” rating in a report on Wednesday, April 11th. BidaskClub downgraded Ares Capital from a “sell” rating to a “strong sell” rating in a report on Wednesday, February 28th. Finally, Oppenheimer set a $18.00 target price on Ares Capital and gave the company a “buy” rating in a report on Tuesday, February 13th. Four research analysts have rated the stock with a hold rating and nine have issued a buy rating to the stock. The stock currently has a consensus rating of “Buy” and an average price target of $17.91.
Ares Capital (NASDAQ:ARCC) last announced its earnings results on Wednesday, May 2nd. The investment management company reported $0.39 EPS for the quarter, beating the consensus estimate of $0.37 by $0.02. The business had revenue of $317.00 million for the quarter, compared to the consensus estimate of $309.81 million. Ares Capital had a return on equity of 8.80% and a net margin of 65.81%. The company’s revenue was up 15.3% on a year-over-year basis. During the same period last year, the business posted $0.28 EPS. sell-side analysts expect that Ares Capital will post 1.59 EPS for the current fiscal year.
In other Ares Capital news, insider Michael J. Arougheti acquired 25,000 shares of the company’s stock in a transaction on Thursday, March 15th. The shares were bought at an average cost of $15.60 per share, for a total transaction of $390,000.00. Following the acquisition, the insider now directly owns 984,535 shares of the company’s stock, valued at $15,358,746. The transaction was disclosed in a document filed with the Securities & Exchange Commission, which can be accessed through this link. Insiders have acquired a total of 25,600 shares of company stock worth $399,574 over the last 90 days. 0.49% of the stock is owned by company insiders.
A number of hedge funds have recently bought and sold shares of ARCC. Bessemer Group Inc. grew its position in shares of Ares Capital by 14,542.3% in the 4th quarter. Bessemer Group Inc. now owns 7,614 shares of the investment management company’s stock worth $120,000 after acquiring an additional 7,562 shares in the last quarter. Van Cleef Asset Management Inc acquired a new position in shares of Ares Capital in the 4th quarter worth approximately $157,000. Cypress Capital Management LLC WY grew its position in shares of Ares Capital by 133.3% in the 4th quarter. Cypress Capital Management LLC WY now owns 10,500 shares of the investment management company’s stock worth $165,000 after acquiring an additional 6,000 shares in the last quarter. Hyman Charles D acquired a new position in shares of Ares Capital in the 1st quarter worth approximately $167,000. Finally, Csenge Advisory Group acquired a new position in shares of Ares Capital in the 4th quarter worth approximately $169,000. Institutional investors own 42.77% of the company’s stock.
Ares Capital Company Profile
Ares Capital Corporation is a specialty finance company. The Company operates as a closed-end, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests primarily in the United States middle-market companies.
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