Investment Thesis
ARI demonstrates strong profitability with 46.7% net margins and impressive 62.9% revenue growth, generating substantial free cash flow of $142.5M. However, the critical concern is severely inadequate interest coverage of 0.5x, indicating the company cannot cover debt service from operating income, which is unsustainable for a REIT and suggests potential covenant violations or refinancing stress.
ARI Strengths
- Exceptional net margin of 46.7% indicating highly profitable lending operations
- Strong revenue growth of 62.9% YoY with corresponding operating income growth
- Robust free cash flow generation of $142.5M with 52.5% FCF margin to revenue
- Conservative leverage with 0.42x debt-to-equity ratio relative to peers
ARI Risks
- Dangerously low interest coverage ratio of 0.5x - unable to cover debt service from operating income
- Low absolute ROE of 6.8% and minimal ROA of 1.3% despite high margins suggests capital inefficiency
- Minimal cash position of $139.8M relative to $773.4M long-term debt creates refinancing risk
- Heavy reliance on financial engineering in REIT model; interest coverage deterioration signals fundamental stress
Key Metrics to Watch
- Interest coverage ratio - must improve above 2.0x to indicate sustainable debt servicing
- Debt-to-assets ratio - currently 0.81x indicates rising leverage concentration
- Operating cash flow sustainability - verify 62.9% revenue growth is repeatable
- Quarterly dividend sustainability relative to free cash flow generation
ARI Financial Metrics
ARI Profitability Ratios
ARI Balance Sheet & Liquidity
ARI 5-Year Financial Trend
5-Year Trend Summary: Apollo Commercial Real Estate Finance, Inc.'s revenue has shown modest growth of 3% over the 5-year period. The most recent EPS of $0.29 reflects profitable operations.
ARI Growth Metrics (YoY)
ARI Quarterly Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q3 2025 | $61.6M | $20.7M | $0.34 |
| Q2 2025 | $70.9M | $20.7M | $0.12 |
| Q1 2025 | $65.8M | $26.0M | $0.16 |
| Q3 2024 | $71.6M | $11.6M | $0.00 |
| Q2 2024 | $81.1M | -$34.5M | $0.23 |
| Q1 2024 | $80.5M | $48.9M | $0.32 |
| Q3 2023 | $76.3M | $11.6M | $0.00 |
| Q2 2023 | $76.0M | $15.2M | $-0.30 |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
ARI Capital Allocation
ARI SEC Filings
Access official SEC EDGAR filings for Apollo Commercial Real Estate Finance, Inc. (CIK: 0001467760)