Contrasting CION Investment (NYSE:CION) & Ares Capital (NASDAQ:ARCC)

Ares Capital (NASDAQ:ARCC) and CION Investment (NYSE:CION) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, valuation, profitability, analyst recommendations, earnings, institutional ownership and dividends.

Risk & Volatility

Ares Capital has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500. Comparatively, CION Investment has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500.

Dividends

Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 9.5%. CION Investment pays an annual dividend of $1.44 per share and has a dividend yield of 14.9%. Ares Capital pays out 96.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CION Investment pays out 282.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CION Investment has increased its dividend for 1 consecutive years. CION Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Ares Capital and CION Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ares Capital	0	3	7	0	2.70
CION Investment	1	1	0	1	2.33

Ares Capital currently has a consensus price target of $22.25, suggesting a potential upside of 9.99%. CION Investment has a consensus price target of $8.50, suggesting a potential downside of 12.01%. Given Ares Capital’s stronger consensus rating and higher probable upside, research analysts clearly believe Ares Capital is more favorable than CION Investment.

Profitability

This table compares Ares Capital and CION Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ares Capital	45.16%	10.08%	4.80%
CION Investment	10.59%	12.02%	4.91%

Institutional & Insider Ownership

27.4% of Ares Capital shares are held by institutional investors. Comparatively, 32.0% of CION Investment shares are held by institutional investors. 0.5% of Ares Capital shares are held by company insiders. Comparatively, 0.6% of CION Investment shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Ares Capital and CION Investment”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ares Capital	$2.99 billion	4.84	$1.52 billion	$2.00	10.12
CION Investment	$252.43 million	1.99	$33.90 million	$0.51	18.94

Ares Capital has higher revenue and earnings than CION Investment. Ares Capital is trading at a lower price-to-earnings ratio than CION Investment, indicating that it is currently the more affordable of 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 CION Investment

CION Investment Corporation is a business development company. It specializes in investments in senior secured loans, including unitranche loans, First Lien, second lien loans, long-term subordinated loans, and mezzanine loans; equity interests such as warrants or options; and corporate bonds; and other debt securities in middle-market companies. The firm invests in growth capital, acquisitions, leveraged buyouts, market/product expansion, refinancing and recapitalization. The fund also invests up to 30 percent of their assets opportunistically in other types of investments, including the securities of larger public companies and foreign securities. It also makes investments in the secondary loan market. The fund does not invest in start-up companies, turnaround situations, or companies with speculative business plans. The fund prefers to invest in high tech industries, healthcare, pharmaceuticals, business services, media, chemicals, plastic, rubber, telecommunication, consumer services, advertising, printing and publishing, consumer goods, durables, diversified financials, and other industries. It also invests in homebuilding, restaurants, beverage and tobacco bars, broadcasting, distributors, Non-durable good distribution, food beverage and tobacco, energy, oil gas and consumables fuels, insurance, aerospace and defense, industrial machinery, paper and forest product machinery, information technology, metals and mining, and real estate. It primarily seeks to invest in the United States. The fund seeks to invest between $5 million and $50 million in companies with an EBITDA between $25 million and $75 million with average targeted hold of $25 million. It also purchases minority interests in the form of common or preferred equity in the target companies, typically in conjunction with its debt investments or through a co-investment with a financial sponsor. The fund seeks to exit its investments through an initial public offering of common stock, a merger, a sale, or other recapitalization.