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Ares Capital (ARCC) Gains But Lags Market: What You Should Know

Zacks Equity Research

Ares Capital (ARCC) closed at $18.28 in the latest trading session, marking a +0.97% move from the prior day. This change lagged the S&P 500's 1.42% gain on the day. At the same time, the Dow added 1.42%, and the tech-heavy Nasdaq gained 1.4%.

Prior to today's trading, shares of the private equity firm had lost 4.28% over the past month. This has lagged the Finance sector's gain of 1.72% and the S&P 500's gain of 0.38% in that time.

ARCC will be looking to display strength as it nears its next earnings release, which is expected to be October 30, 2019. In that report, analysts expect ARCC to post earnings of $0.46 per share. This would mark year-over-year growth of 2.22%. Our most recent consensus estimate is calling for quarterly revenue of $370.25 million, up 8.26% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $1.86 per share and revenue of $1.50 billion. These totals would mark changes of +10.71% and +12.12%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for ARCC. These revisions typically reflect the latest short-term business trends, which can change frequently. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. ARCC currently has a Zacks Rank of #3 (Hold).

Digging into valuation, ARCC currently has a Forward P/E ratio of 9.72. This valuation marks a premium compared to its industry's average Forward P/E of 9.66.

The Financial - SBIC & Commercial Industry industry is part of the Finance sector. This group has a Zacks Industry Rank of 84, putting it in the top 33% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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