Ares Capital (ARCC) versus 180 Degree Capital (TURN) Critical Survey

Ares Capital (NASDAQ:ARCC) and 180 Degree Capital (NASDAQ:TURN) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, risk, valuation, institutional ownership, earnings and profitability.

Analyst Recommendations

This is a breakdown of recent ratings for Ares Capital and 180 Degree Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Capital 0 0 4 0 3.00
180 Degree Capital 0 0 0 0 N/A

Ares Capital currently has a consensus price target of $19.13, suggesting a potential upside of 7.81%. Given Ares Capital’s higher probable upside, research analysts plainly believe Ares Capital is more favorable than 180 Degree Capital.

Dividends

Ares Capital pays an annual dividend of $1.60 per share and has a dividend yield of 9.0%. 180 Degree Capital does not pay a dividend. 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.

Risk & Volatility

Ares Capital has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500. Comparatively, 180 Degree Capital has a beta of 0.69, suggesting that its share price is 31% less volatile than the S&P 500.

Valuation and Earnings

This table compares Ares Capital and 180 Degree Capital’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ares Capital $1.34 billion 5.66 $858.00 million $1.68 10.56
180 Degree Capital $1.79 million 34.08 -$16.36 million N/A N/A

Ares Capital has higher revenue and earnings than 180 Degree Capital.

Profitability

This table compares Ares Capital and 180 Degree Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ares Capital 59.58% 10.12% 5.75%
180 Degree Capital N/A N/A N/A

Insider & Institutional Ownership

39.5% of Ares Capital shares are owned by institutional investors. Comparatively, 28.5% of 180 Degree Capital shares are owned by institutional investors. 0.5% of Ares Capital shares are owned by company insiders. Comparatively, 3.0% of 180 Degree Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

Ares Capital beats 180 Degree Capital on 9 of the 13 factors compared between the two stocks.

Ares Capital Company Profile

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.

180 Degree Capital Company Profile

180 Degree Capital Corp. is a publicly owned investment manager. The firm manages separate client-focused equity portfolios. It invests in the public equity markets of the United States. The firm also invests in privately held portfolio companies. It primarily invests in value stocks of small cap companies. The firm is focused on investing in and providing value-added assistance through constructive activism to companies, with the view that the result of constructive activism leads to a reversal in direction for the share price of the investee companies. It also seeks active engagement with management of the investee companies and prefers to take a board seat. 180 Degree Capital Corp. was founded in August 1981 and is based in Montclair, New Jersey.

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