Comparing Ares Capital (ARCC) and Portman Ridge Finance (PTMN)

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

Dividends

Ares Capital pays an annual dividend of $1.60 per share and has a dividend yield of 9.2%. Portman Ridge Finance pays an annual dividend of $0.40 per share and has a dividend yield of 13.3%. Ares Capital pays out 95.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Portman Ridge Finance pays out 148.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional and Insider Ownership

39.3% of Ares Capital shares are held by institutional investors. Comparatively, 27.6% of Portman Ridge Finance shares are held by institutional investors. 0.5% of Ares Capital shares are held by insiders. Comparatively, 8.1% of Portman Ridge Finance shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Ares Capital 64.17% 9.69% 5.61%
Portman Ridge Finance -35.34% 5.81% 3.52%

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Ares Capital and Portman Ridge Finance, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Capital 0 0 4 0 3.00
Portman Ridge Finance 0 0 0 0 N/A

Ares Capital currently has a consensus price target of $19.13, indicating a potential upside of 10.23%. Given Ares Capital’s higher probable upside, equities research analysts clearly believe Ares Capital is more favorable than Portman Ridge Finance.

Risk and Volatility

Ares Capital has a beta of 0.64, indicating that its stock price is 36% less volatile than the S&P 500. Comparatively, Portman Ridge Finance has a beta of 0.97, indicating that its stock price is 3% less volatile than the S&P 500.

Valuation and Earnings

This table compares Ares Capital and Portman Ridge Finance’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ares Capital $1.34 billion 5.53 $858.00 million $1.68 10.33
Portman Ridge Finance $27.09 million 4.15 -$9.57 million $0.27 11.15

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

Summary

Ares Capital beats Portman Ridge Finance on 11 of the 15 factors compared between the two stocks.

About Ares Capital

Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors. The fund will also consider investments in industries such as restaurants, retail, oil and gas, and technology sectors. It focuses on investments in Northeast, Mid-Atlantic, Southeast and Southwest regions from its New York office, the Midwest region, from the Chicago office, and the Western region from the Los Angeles office. The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million The fund invests through revolvers, first lien loans, warrants, unitranche structures, second lien loans, mezzanine debt, private high yield, junior capital, subordinated debt, and non-control preferred and common equity. The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically considers the purchase of stressed and discounted debt positions. The fund prefers to be an agent and/or lead the transactions in which it invests. The fund also seeks board representation in its portfolio companies.

About Portman Ridge Finance

There is no company description available for Portman Ridge Finance Corp.

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