Consistent performance

Ares Capital (ARCC) has seen improvements in its deployment of funds and maintaining of yields. It has also seen a marginal increase in the fair value of investments over the past few quarters.

The company is expected to post core EPS (earnings per share) of $0.39 in the third quarter compared to $0.41 in the prior year’s quarter. The performance is in line with the previous quarter’s numbers. For the year, Ares is positioned to register EPS of $1.53, translating to an implied price-to-earnings multiple of 10.2x.

Ares Capital Is Expected to See Stable Performance in 3Q

Ares Capital’s performance has largely remained stable. However, the company is expanding its portfolio after the acquisition of American Capital (ACAS) with the expansion of SDLP (Senior Direct Lending Program). It’s expected to see higher growth for its bottom line in the next financial year. In 2Q16, the company’s core EPS was $0.39, which was higher than analyst expectations of $0.38.

As of June 30, 2016, Ares Capital’s net asset value was $5.2 billion, or $16.62 per share, compared to $16.50 in the March quarter. The company’s investments at fair value rose to $8.9 billion compared to $8.6 billion in the prior year’s quarter.

Here’s how some of Ares Capital’s peers in investment management fared with their quarterly earnings:

  • Blackstone Group (BX): beat estimates
  • KKR (KKR): beat estimates
  • Prospect Capital (PSEC): beat estimates
  • BlackRock Capital Investment (BKCC): beat estimates

Together, these companies form 6.3% of the PowerShares Global Listed Private Equity ETF (PSP).

Middle-market lending

Ares Capital is a specialty finance company that provides debt and equity financing solutions to US middle-market companies, venture capital-backed businesses, and power-generation projects. It originates and invests in senior secured loans, mezzanine debt, and, to a lesser extent, equity investments through its national direct origination platform.

The company acts as a closed-end fund and is regulated as a business development company. Its objective is to generate both current income and capital appreciation through debt and equity investments.

In this series, we’ll take a look at Ares Capital’s portfolio expansion, yields, fresh deployments, dividends, valuations, and acquisition of American Capital.

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