Investment Thesis
ARCC is a well-capitalized BDC with substantial assets and equity, but faces headwinds including declining profitability (down 14.7% YoY) and negative operating cash flow of -$1.7B, suggesting portfolio deterioration and significant dividend payouts exceeding net income. The moderate ROE of 9.1% and manageable leverage at 1.12x provide a reasonable financial cushion, though the negative free cash flow and margin compression warrant cautious observation.
ARCC Strengths
- Large asset base of $31.2B with significant equity cushion of $14.3B providing financial stability
- Debt-to-equity ratio of 1.12x is conservative for a BDC, indicating manageable leverage
- ROE of 9.1% demonstrates reasonable returns on shareholder capital despite challenging environment
ARCC Risks
- Net income declined 14.7% YoY and EPS down 23.8%, indicating deteriorating portfolio performance and investment quality
- Negative operating cash flow of -$1.7B and negative free cash flow suggest portfolio valuations are declining and dividend payments exceed earnings
- High long-term debt of $16.0B relative to operating cash flow creates refinancing risk if credit markets tighten or portfolio deteriorates further
Key Metrics to Watch
- Trend in net income and portfolio impairments
- Operating cash flow sustainability and dividend coverage ratios
- Credit quality deterioration within investment portfolio
- Refinancing needs and debt maturity schedule
ARCC Financial Metrics
ARCC Profitability Ratios
ARCC Balance Sheet & Liquidity
ARCC 5-Year Financial Trend
5-Year Trend Summary: ARES CAPITAL CORP's revenue has remained relatively flat over the 5-year period, with a 0% decline. The most recent EPS of $2.68 reflects profitable operations.
ARCC Growth Metrics (YoY)
ARCC Capital Allocation
ARCC SEC Filings
Access official SEC EDGAR filings for ARES CAPITAL CORP (CIK: 0001287750)