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 businesses based on the strength of their profitability, risk, earnings, valuation, analyst recommendations, dividends and institutional ownership.
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|
|Portman Ridge Finance||-88.64%||3.28%||1.88%|
Insider & Institutional Ownership
39.2% of Ares Capital shares are held by institutional investors. Comparatively, 27.5% of Portman Ridge Finance shares are held by institutional investors. 0.5% of Ares Capital shares are held by company insiders. Comparatively, 8.1% of Portman Ridge Finance shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
Risk and Volatility
Ares Capital has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500. Comparatively, Portman Ridge Finance has a beta of 0.89, suggesting that its share price is 11% less volatile than the S&P 500.
This is a summary of current recommendations and price targets for Ares Capital and Portman Ridge Finance, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Portman Ridge Finance||0||0||0||0||N/A|
Ares Capital currently has a consensus target price of $19.30, suggesting a potential upside of 8.55%. Given Ares Capital’s higher possible upside, equities analysts plainly believe Ares Capital is more favorable than Portman Ridge Finance.
Earnings & Valuation
This table compares Ares Capital and Portman Ridge Finance’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Ares Capital||$1.34 billion||5.67||$858.00 million||$1.68||10.58|
|Portman Ridge Finance||$27.09 million||3.79||-$9.57 million||$0.27||10.19|
Ares Capital has higher revenue and earnings than Portman Ridge Finance. Portman Ridge Finance is trading at a lower price-to-earnings ratio than Ares Capital, indicating that it is currently the more affordable of the two stocks.
Ares Capital pays an annual dividend of $1.60 per share and has a dividend yield of 9.0%. Portman Ridge Finance pays an annual dividend of $0.40 per share and has a dividend yield of 14.5%. 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.
Ares Capital beats Portman Ridge Finance on 12 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
Portman Ridge Finance Corp. is a private equity fund and non-diversified closed-end investment company that invests in middle market companies generating consistent cash flows located in North America. It targets companies operating across a broad range of sectors such as aerospace and defense, automotive, beverage, food and tobacco, broadcasting and entertainment, buildings and real estate, personal and cargo transport, chemicals, plastics and rubber, containers, packaging and glass, diversified or conglomerate service, ecological, electronics, finance, and healthcare. The company was founded on August 8, 2006 and is headquartered in New York, NY.
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