TPG Specialty Lending (TSLX) and Ares Capital Corporation (ARCC) Head-To-Head Review
TPG Specialty Lending (NYSE: TSLX) and Ares Capital Corporation (NASDAQ:ARCC) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their earnings, risk, analyst recommendations, profitability, institutional ownership, dividends and valuation.
Volatility & Risk
TPG Specialty Lending has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500. Comparatively, Ares Capital Corporation has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500.
This table compares TPG Specialty Lending and Ares Capital Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|TPG Specialty Lending||60.77%||12.68%||7.41%|
|Ares Capital Corporation||44.61%||8.95%||5.13%|
This is a breakdown of recent ratings and price targets for TPG Specialty Lending and Ares Capital Corporation, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|TPG Specialty Lending||0||2||2||0||2.50|
|Ares Capital Corporation||0||2||7||0||2.78|
TPG Specialty Lending presently has a consensus target price of $20.25, indicating a potential downside of 0.15%. Ares Capital Corporation has a consensus target price of $17.93, indicating a potential upside of 13.40%. Given Ares Capital Corporation’s stronger consensus rating and higher probable upside, analysts plainly believe Ares Capital Corporation is more favorable than TPG Specialty Lending.
Earnings & Valuation
This table compares TPG Specialty Lending and Ares Capital Corporation’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|TPG Specialty Lending||N/A||N/A||N/A||$2.17||9.35|
|Ares Capital Corporation||N/A||N/A||N/A||$1.29||12.26|
TPG Specialty Lending is trading at a lower price-to-earnings ratio than Ares Capital Corporation, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
62.7% of TPG Specialty Lending shares are owned by institutional investors. Comparatively, 45.0% of Ares Capital Corporation shares are owned by institutional investors. 4.8% of TPG Specialty Lending shares are owned by insiders. Comparatively, 0.5% of Ares Capital Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 7.7%. Ares Capital Corporation pays an annual dividend of $1.52 per share and has a dividend yield of 9.6%. TPG Specialty Lending pays out 71.9% of its earnings in the form of a dividend. Ares Capital Corporation pays out 117.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
TPG Specialty Lending beats Ares Capital Corporation on 8 of the 13 factors compared between the two stocks.
About TPG Specialty Lending
TPG Specialty Lending, Inc. is an externally managed, closed-end, non-diversified management investment company. The Company is a specialty finance company focused on lending to middle-market companies. It seeks to generate current income primarily in the United States-domiciled middle-market companies through direct originations of senior secured loans and originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. The Company invests in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Its first-lien debt may include standalone first-lien loans; last out first-lien loans; unitranche loans and secured corporate bonds. Its second-lien debt may include secured loans and secured corporate bonds, with a secondary priority behind first-lien debt. As of December 31, 2016, the Company’s portfolio was invested across 19 different industries. The Company’s investment advisor is TSL Advisers, LLC.
About Ares Capital Corporation
Ares Capital Corporation is a specialty finance company. The Company operates as a closed-end, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests primarily in the United States middle-market companies. It may from time to time invest in larger or smaller (in particular, for investments in early-stage and/or venture capital-backed) companies. It invests primarily in first lien senior secured loans (including unitranche loans, which are loans that combine both senior and mezzanine debt, generally in a first lien position), second lien senior secured loans, and mezzanine debt, which in some cases includes an equity component. It invests in various industries, such as automotive services, business services, consumer products, and containers and packaging. Ares Capital Management LLC serves as its investment advisor.
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