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Ares Capital's NAV, Dividend, And Valuation Versus 14 BDC Peers (Post Q1 2020 Earnings - Attractive Valuation)

Published Fri, 12 Jun 2020 03:02:09 -0400 on Seeking Alpha

Part 1 of this article compares ARCC’s recent quarterly change in NAV, quarterly and trailing twelve-month economic return, NII, and current valuation to fourteen BDC peers.
Other metrics analyzed include each company’s oil and gas exposure, NII per share, price to annualized NII ratio, and percentage of income attributable to capitalized PIK income.
As a direct result of the COVID-19 sector sell-off, some stocks (including ARCC) remain attractively valued.
My buy, sell, or hold recommendation and updated price target for ARCC is stated in the “Conclusions Drawn” section of the article.
I also provide a list of the other BDC stocks I currently believe are undervalued (a buy recommendation), overvalued (a sell recommendation), and appropriately valued (a hold recommendation).
Focus of Article
The focus of PART 1 of this article is to analyze Ares Capital Corp.'s (ARCC) recent results and compare a handful of the company's metrics to fourteen business development company ("BDC") peers. This analysis will show past and current data with supporting documentation within two detailed tables. Table 1 will compare ARCC's recent net asset value ("NAV") economic return (loss), net investment income ("NII"), stock price to annualized NII ratio, and percentage of total investment income attributable to capitalized payment-in-kind ("PIK") income to the fourteen BDC peers. Table 1 will also provide a premium (discount) to estimated CURRENT NAV analysis using stock prices as of 6/5/2020. Table 2 will compare ARCC's investment portfolio (including several additional metrics) as of 12/31/2019 and 3/31/2020 to the fourteen BDC peers.
I am writing this two-part article due to the continued requests that such an analysis be specifically performed on ARCC and some of the company's BDC peers at periodic intervals. These BDC peers include Apollo Investment Corp. (OTC:AINV), FS KKR Capital Corp. (FSK), Gladstone Investment Corp. (GAIN), Golub Capital BDC Inc. (GBDC),... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
PROSPECT CAPITAL 6.71   16.8 0.40 0.72 10.76
APOLLO INVESTMENT 16.78   14.2 1.18 1.80 10.73
TCP CAPITAL 13.75   29.3 0.47 1.44 10.48
OAKTREE SPECIALTY LENDING 4.90   0.0 -1.39 0.50 10.02
PENNANTPARK FLOATING RATE CAPITAL 11.68   30.0 0.39 1.14 9.81
NEWTEK BUSINESS SERVICES 22.91   0.0 0.00 2.32 8.09
SOLAR CAPITAL 20.87   12.4 1.69 1.64 7.93
OAKTREE STRATEGIC INCOME 8.10   19.8 0.41 0.62 7.51
GOLUB CAPITAL BDC 18.55   15.7 1.18 1.28 6.89
GLADSTONE INVESTMENT 12.34   7.4 1.67 0.82 6.73
MAIN STREET CAPITAL 43.18   16.8 2.57 2.46 5.69
BLACKROCK 434.75   16.5 26.34 13.20 3.08


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