Ares Capital Corporation Stock Upgraded (ARCC)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Ares Capital Corporation (Nasdaq: ARCC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 22.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 45.6% when compared to the same quarter one year prior, rising from $80.34 million to $116.99 million.
  • Net operating cash flow has significantly increased by 197.33% to $53.43 million when compared to the same quarter last year. In addition, ARES CAPITAL CORP has also vastly surpassed the industry average cash flow growth rate of -104.20%.
  • The gross profit margin for ARES CAPITAL CORP is currently very high, coming in at 71.00%. Regardless of ARCC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARCC's net profit margin of 48.80% significantly outperformed against the industry.
  • ARES CAPITAL CORP has improved earnings per share by 21.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARES CAPITAL CORP reported lower earnings of $1.81 versus $2.20 in the prior year. For the next year, the market is expecting a contraction of 13.5% in earnings ($1.57 versus $1.81).

Ares Capital Corporation specializes in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. Ares has a market cap of $5.08 billion and is part of the financial sector and financial services industry. Shares are down 4.3% year to date as of the close of trading on Wednesday.

You can view the full Ares Ratings Report or get investment ideas from our investment research center.

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