Head to Head Review: Portman Ridge Finance (NASDAQ:PTMN) and Ares Management (NYSE:ARES)

Portman Ridge Finance (NASDAQ:PTMN) and Ares Management (NYSE:ARES) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, profitability, dividends, risk, analyst recommendations, earnings and institutional ownership.

Profitability

This table compares Portman Ridge Finance and Ares Management’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Portman Ridge Finance	-15.92%	11.49%	4.54%
Ares Management	9.41%	19.04%	4.83%

Institutional and Insider Ownership

30.1% of Portman Ridge Finance shares are held by institutional investors. Comparatively, 50.0% of Ares Management shares are held by institutional investors. 2.1% of Portman Ridge Finance shares are held by company insiders. Comparatively, 36.9% of Ares Management shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Portman Ridge Finance and Ares Management”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Portman Ridge Finance	-$2.85 million	-36.45	-$5.93 million	($0.93)	-8.45
Ares Management	$5.60 billion	6.15	$527.36 million	$1.69	61.88

Ares Management has higher revenue and earnings than Portman Ridge Finance. Portman Ridge Finance is trading at a lower price-to-earnings ratio than Ares Management, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Portman Ridge Finance has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500. Comparatively, Ares Management has a beta of 1.52, meaning that its stock price is 52% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Portman Ridge Finance and Ares Management, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Portman Ridge Finance	0	0	0	0	0.00
Ares Management	1	4	12	1	2.72

Ares Management has a consensus target price of $173.27, indicating a potential upside of 65.67%. Given Ares Management’s stronger consensus rating and higher probable upside, analysts plainly believe Ares Management is more favorable than Portman Ridge Finance.

Dividends

Portman Ridge Finance pays an annual dividend of $1.88 per share and has a dividend yield of 23.9%. Ares Management pays an annual dividend of $5.40 per share and has a dividend yield of 5.2%. Portman Ridge Finance pays out -202.2% of its earnings in the form of a dividend. Ares Management pays out 319.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Management has increased its dividend for 7 consecutive years. Portman Ridge Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Ares Management beats Portman Ridge Finance on 16 of the 18 factors compared between the two stocks.

About Portman Ridge Finance

Portman Ridge Finance Corporation is a business development company specializing in investments in unitranche loans (including last out), first lien loans, second lien loans, subordinated debt, equity co-investment, mezzanine, buyout in middle market companies. It also makes acquisitions in businesses complementary to the firm's business. It primarily invests in healthcare, cargo transport, manufacturing, industrial & environmental services, logistics & distribution, media & telecommunications, real estate, education, automotive, agriculture, aerospace/defense, packaging, electronics, finance, non-durable consumer, consumer products, business services, utilities, insurance, and food and beverage sectors. The fund typically invests $1 million to $20 million in its portfolio companies. It provides senior secured term loans from $2 million to $20 million maturing in five to seven years; second lien term loans from $5 million to $15 million maturing in six to eight years; senior unsecured loans $5 million to $23 million maturing in six to eight years; mezzanine loans from $5 million to $15 million maturing in seven to ten years; and equity investments from $1 to $5 million. The fund targets the companies with EBITDA between $5 million and $25 million. While investing in debt securities, it invests in those middle market firms with EBITDA between $10 million and $50 million and/or total debt between $25 million and $150 million. It invests in minority, and majority or control equity positions alongside its private equity sponsor partners.

About Ares Management

Ares Management Corporation operates as an alternative asset manager in the United States, Europe, and Asia. The company's Tradable Credit Group segment manages various types of investment funds, such as commingled and separately managed accounts for institutional investors, and publicly traded vehicles and sub-advised funds for retail investors in the tradable and non-investment grade corporate credit markets. Its Direct Lending Group segment provides financing solutions to small-to-medium sized companies. The company's Private Equity Group segment focuses on majority or shared-control investments primarily in under-capitalized companies. Its Real Estate Group segment invests in new developments and the repositioning of assets, with a focus on control or majority-control investments; and originates and invests in a range of self-originated financing opportunities for middle-market owners and operators of commercial real estate. The firm was previously known as Ares Management, L.P. Ares Management Corporation was founded in 1997 and is headquartered in Los Angeles, California with additional offices in the United States, Europe and Asia. Ares Management GP LLC is the general partner of the company.