Ares Management
ARCC
$18.61
-1.33%
Ares Capital Corporation is a closed-ended specialty finance company that provides debt and equity financing to middle-market companies in the United States. As one of the largest business development companies (BDCs) by market capitalization, it distinguishes itself through its scale, diversified portfolio, and affiliation with Ares Management, a global alternative asset manager. The current investor narrative centers on the sustainability of its high dividend yield amid falling interest rates and potential recession risks, with recent news highlighting concerns over private credit redemption limits and the impact of rate cuts on net investment income.…
ARCC
Ares Management
$18.61
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ARCC 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Ares Management's 12-month outlook, with a consensus price target around $20.63 and implied upside of +10.8% versus the current price.
Average Target
$20.63
0 analysts
Implied Upside
+10.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$19 - $23
Analyst target range
ARCC is covered by 12 analysts, with a consensus recommendation of 'Buy' and a mean recommendation score of 1.69 (1=Strong Buy, 5=Sell). The average target price is $20.625, implying 7.6% upside from the current price of $19.17. The distribution shows 1 analyst with a low target of $18.50 (3.5% downside) and a high target of $23.00 (20.0% upside). The wide spread of $4.50 between low and high targets indicates significant uncertainty about the stock's future. The high target likely assumes a recovery in earnings and stable dividends, while the low target prices in further credit losses or dividend cuts. Recent ratings actions include a downgrade from Wells Fargo (Overweight to Equal Weight) in June 2026, while JP Morgan maintained Overweight. The consensus leans bullish but with caution, as the average target is only modestly above the current price. The implied upside of 7.6% is modest, suggesting limited near-term appreciation potential.
Bulls vs Bears: ARCC Investment Factors
ARCC presents a mixed picture: a high dividend yield and accelerating revenue growth are offset by severe earnings volatility and a high payout ratio. The bull case rests on the stock being undervalued historically and the potential for earnings stabilization, while the bear case focuses on the risk of dividend cuts and further credit losses. The single most important tension is whether the Q1 2026 earnings collapse was a one-time event or the start of a trend. If earnings recover, the stock could re-rate higher; if not, the dividend may be cut, leading to further downside. Currently, the bearish evidence is stronger due to the earnings decline and negative PEG ratio.
Bullish
- Attractive 8.94% Dividend Yield: ARCC offers a high dividend yield of 8.94%, supported by $1.074 billion in TTM free cash flow. The payout ratio is 97.31%, which is high but sustainable if earnings stabilize.
- Revenue Growth Accelerating: Q1 2026 revenue of $763 million grew 71.08% YoY, accelerating from $446 million in Q1 2025. This growth is driven by portfolio expansion and higher interest income.
- Discounted Valuation vs. History: Trailing P/E of 10.88x is near the lower end of its 5-year range (4.5x-35x), and P/B of 0.99x is below 1.0, suggesting the stock is cheap relative to book value and its own history.
- Analyst Consensus Buy Rating: 12 analysts rate ARCC a Buy with a mean score of 1.69 (1=Strong Buy). The average target price of $20.625 implies 7.6% upside from the current price of $19.17.
Bearish
- Net Income Volatility Spikes: Q1 2026 net income plunged to $92 million from $241 million in Q1 2025, a 61.8% decline, due to a $306 million net other expense. Net margin collapsed to 12.06% from 46.14% in Q4 2025.
- High Payout Ratio Threatens Dividend: The payout ratio of 97.31% leaves minimal retained earnings for growth. If earnings continue to decline, the dividend could be at risk, which would be a major negative for income investors.
- Negative PEG Ratio Signals Earnings Risk: The PEG ratio is -0.46, indicating negative earnings growth expectations. This is a red flag that the market expects earnings to deteriorate further.
- Sustained Price Downtrend: ARCC is down 17.55% over the past year and trades at 81.9% of its 52-week range. The stock has been in a sustained downtrend, with a 1-year relative strength of -35.90% vs. SPY.
ARCC Technical Analysis
ARCC is in a sustained downtrend, with a 1-year price change of -17.55% and currently trading at $19.17, which is 81.9% of its 52-week range ($17.40–$23.42). The stock is near the lower end of its range, suggesting bearish sentiment and potential value opportunity, but also risk of further downside if fundamentals deteriorate. The 52-week low of $17.40 provides a key support level, while the high of $23.42 represents resistance. The beta of 0.62 indicates lower volatility than the market, which may appeal to risk-averse investors but also limits upside participation in rallies. Short-term momentum shows a divergence: the 1-month change is +5.91%, while the 3-month change is only +0.42%, and the 1-year change is deeply negative. This suggests a recent short-term bounce but lack of sustained recovery, potentially signaling a dead cat bounce or early reversal. The 1-month relative strength of +5.60% versus SPY's +0.31% indicates outperformance recently, but the 1-year relative strength of -35.90% underscores persistent weakness. The stock has been consolidating between $18 and $19 over the past three months, with volume averaging 6.78 million shares. A breakout above $19.26 (recent high) could target the 52-week high of $23.42, while a breakdown below $17.40 would signal further downside. The beta of 0.62 implies ARCC is 38% less volatile than the S&P 500, which may provide some downside protection but also means it may lag during market rallies.
Beta
0.62
0.62x market volatility
Max Drawdown
-24.9%
Largest decline past year
52-Week Range
$17-$23
Price range past year
Annual Return
-19.3%
Cumulative gain past year
| Period | ARCC Return | S&P 500 |
|---|---|---|
| 1m | +4.0% | +0.6% |
| 3m | -0.3% | +3.4% |
| 6m | -10.4% | +7.1% |
| 1y | -19.3% | +16.4% |
| ytd | -9.0% | +8.3% |
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ARCC Fundamental Analysis
Revenue has grown strongly, with Q1 2026 revenue of $763 million representing a 71.08% YoY increase, accelerating from $446 million in Q1 2025. However, net income in Q1 2026 was only $92 million, a sharp decline from $241 million in Q1 2025, due to a $306 million net other expense. The revenue growth is driven by portfolio expansion and higher interest income, but the earnings volatility raises concerns about earnings quality. Gross margin remains high at 72.08% in Q1 2026, consistent with prior quarters (70.39% in Q4 2025, 70.29% in Q3 2025). However, net margin collapsed to 12.06% in Q1 2026 from 46.14% in Q4 2025, reflecting the impact of non-recurring charges. Operating margin was 52.95% in Q1 2026, down from 83.31% in Q4 2025, indicating operational deleveraging. The company remains profitable but with significant earnings swings. ARCC has a debt-to-equity ratio of 1.12, which is moderate for a BDC, and a current ratio of 1.71, indicating adequate liquidity. Free cash flow was $114 million in Q1 2026, down from $248 million in Q4 2025, but still positive. The company generated $1.074 billion in TTM free cash flow, supporting its dividend. ROE is 9.07%, reasonable for the sector. However, the high payout ratio of 97.31% suggests limited retained earnings for growth, and the dividend yield of 8.94% is attractive but may be at risk if earnings continue to decline.
Quarterly Revenue
$763000000.0B
2026-03
Revenue YoY Growth
+71.1%
YoY Comparison
Gross Margin
72.1%
Latest Quarter
Free Cash Flow
$1.1B
Last 12 Months
Revenue & Net Income Trends (2 Years)
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Valuation Analysis: Is ARCC Overvalued?
Since net income is positive, the primary valuation metric is the P/E ratio. The trailing P/E is 10.88x, while the forward P/E is 9.99x, indicating the market expects earnings to improve slightly. The gap between trailing and forward P/E is narrow, suggesting limited growth expectations. Compared to the asset management industry average P/E (not provided, but typically around 15-20x), ARCC trades at a discount, reflecting its BDC structure and higher risk profile. The P/B ratio of 0.99x is below 1.0, suggesting the stock trades at or slightly below book value, which is common for BDCs. Historically, ARCC's trailing P/E has ranged from about 4.5x to 35x over the past five years. The current 10.88x is near the lower end of that range, indicating the stock is cheap relative to its own history. This could imply a value opportunity if earnings stabilize, or a value trap if the business deteriorates further. The PEG ratio is negative (-0.46) due to negative earnings growth expectations, which is a red flag. The EV/EBITDA of 13.33x is elevated relative to the P/E, reflecting the company's debt load.
PE
10.9x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 4x~20x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
13.3x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: ARCC's earnings are highly volatile, as seen in Q1 2026 net income of $92 million, down 61.8% YoY from $241 million, driven by a $306 million net other expense. The debt-to-equity ratio of 1.12 is moderate for a BDC, but the high payout ratio of 97.31% means the dividend consumes nearly all free cash flow, leaving little buffer for earnings shocks. Revenue concentration in middle-market loans exposes the company to credit risk, and the net margin collapse from 46.14% to 12.06% in one quarter highlights operational fragility.
Market & Competitive Risks: ARCC trades at a trailing P/E of 10.88x, which is a discount to the asset management industry average of 15-20x, but the negative PEG ratio of -0.46 suggests the market expects further earnings declines. The stock's beta of 0.62 provides some downside protection but also limits upside in rallies. Recent news about Blackstone limiting redemptions in private credit signals sector-wide stress, which could spill over to ARCC. The 1-year relative strength of -35.90% vs. SPY indicates persistent underperformance, and the wide analyst target spread ($18.50 to $23.00) reflects high uncertainty.
Worst-Case Scenario: If credit losses mount and net income continues to decline, ARCC could cut its dividend, triggering a sell-off. The 52-week low of $17.40 provides a downside target, representing a 9.2% decline from the current price of $19.17. In a severe recession, the stock could fall to $15.00, a 21.8% loss, based on historical drawdowns and the max drawdown of -24.95%. An investor could lose up to 24.95% from the current price in an adverse scenario.