Contrasting Westwood Holdings Group (NYSE:WHG) & Ares Capital (NASDAQ:ARCC)

Ares Capital (NASDAQ:ARCC) and Westwood Holdings Group (NYSE:WHG) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their valuation, dividends, profitability, earnings, risk, analyst recommendations and institutional ownership.

Earnings and Valuation

This table compares Ares Capital and Westwood Holdings Group”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ares Capital	$3.05 billion	4.54	$1.30 billion	$1.22	15.71
Westwood Holdings Group	$97.76 million	1.84	$7.06 million	$0.81	23.35

Ares Capital has higher revenue and earnings than Westwood Holdings Group. Ares Capital is trading at a lower price-to-earnings ratio than Westwood Holdings Group, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Ares Capital has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500. Comparatively, Westwood Holdings Group has a beta of 0.57, indicating that its stock price is 43% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Ares Capital and Westwood Holdings Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ares Capital	0	2	9	0	2.82
Westwood Holdings Group	0	0	1	0	3.00

Ares Capital currently has a consensus price target of $20.39, suggesting a potential upside of 6.36%. Given Ares Capital’s higher probable upside, equities analysts plainly believe Ares Capital is more favorable than Westwood Holdings Group.

Institutional and Insider Ownership

27.4% of Ares Capital shares are owned by institutional investors. Comparatively, 56.6% of Westwood Holdings Group shares are owned by institutional investors. 0.5% of Ares Capital shares are owned by company insiders. Comparatively, 17.4% of Westwood Holdings Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Ares Capital and Westwood Holdings Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ares Capital	28.34%	9.72%	4.44%
Westwood Holdings Group	7.00%	7.20%	5.83%

Dividends

Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 10.0%. Westwood Holdings Group pays an annual dividend of $0.60 per share and has a dividend yield of 3.2%. Ares Capital pays out 157.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Westwood Holdings Group pays out 74.1% of its earnings in the form of a dividend.

Summary

Ares Capital beats Westwood Holdings Group on 10 of the 16 factors compared between the two stocks.

About Ares Capital

Ares Capital Corporation is a business development company that provides financing to U.S. middle-market companies, including businesses backed by private equity firms. It is externally managed by Ares Capital Management, an affiliate of Ares Management Corporation. The company invests primarily in debt, including first-lien and second-lien loans and subordinated debt, and may also make equity investments. Its financing supports a range of business needs, such as acquisitions, growth, and refinancing.

About Westwood Holdings Group

Westwood Holdings Group, Inc. is an investment management and wealth management firm headquartered in Dallas, Texas. Through its subsidiaries, it provides investment advisory services to institutional investors, private wealth clients and financial intermediaries in the United States and internationally. The company offers investment strategies across equities, fixed income, alternatives and multi-asset portfolios. Its wealth management services include financial planning and investment management for individuals, families, trusts, foundations and endowments.