Ares Capital Corporation ARCC remains well poised for top-line growth, supported by robust loan originations. Moreover, given a solid liquidity position, the company is expected to boost shareholder value through efficient capital deployment actions. Thus, it seems to be a wise idea to add the stock to your portfolio now.
In fact, the Zacks Consensus Estimate for its current-year earnings has been revised 3.5% upward over the past 30 days, reflecting analysts’ optimism regarding its earnings growth potential. Thus, the stock currently carries a Zacks Rank #2 (Buy).
Moreover, the company’s price performance looks decent. The stock has gained 10.4% over the past six months, outperforming 2.6% growth recorded by the industry.
Here are a few other aspects that make Ares Capital an attractive investment option now.
Revenue Strength: The company’s total investment income witnessed a five-year (2014-2018) CAGR of 7.8%, driven mainly by the acquisition of American Capital in 2017. Moreover, given the improvement in economy and regulatory changes, the company’s top line is expected to improve further.
Its projected sales growth rates of 12.1% for 2019 (higher than the industry average of 6.8%) and 4.6% for 2020 indicate constant upward momentum in revenues.
Earnings per Share (EPS) Growth: Ares Capital witnessed earnings growth of 1.7% over the last three-five years. Moreover, this uptrend is likely to continue in the near term as reflected by its projected EPS growth rate of more than 10% for 2019.
Notably, the company recorded an average positive earnings surprise of 11.4% over the trailing four quarters.
Superior Return on Equity (ROE): Ares Capital’s ROE is 10.72%, higher than the industry average of 9.46%. This indicates that the company reinvests its cash more efficiently than the industry.
Favorable Valuation: Ares Capital currently has a Value Score of B. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Other Key Picks
Gladstone Investment Corporation’s GAIN Zacks Consensus Estimate for current fiscal-year earnings has been revised 4.9% upward over the past 30 days. The stock has gained nearly 22.6% so far this year. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
TriplePoint Venture Growth BDC Corp. TPVG also carries a Zacks Rank #2 at present. Over the past 30 days, it has witnessed an upward earnings estimate revision of 1.2% for the current year. Additionally, the stock has gained around 39.3% so far this year.
Hercules Capital, Inc.’s HTGC earnings estimates for 2019 have moved 1.5% upward over the past 30 days. The stock has gained 17.1% year to date. Currently, it carries a Zacks Rank of 2.
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Hercules Capital, Inc. (HTGC) : Free Stock Analysis Report
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