Ares Capital (NASDAQ: ARCC) and Safeguard Scientifics (NYSE:SFE) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, profitability, dividends, analyst recommendations, risk and institutional ownership.
Ares Capital pays an annual dividend of $1.52 per share and has a dividend yield of 9.2%. Safeguard Scientifics does not pay a dividend. Ares Capital pays out 109.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Earnings & Valuation
This table compares Ares Capital and Safeguard Scientifics’ top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Ares Capital||$1.16 billion||6.09||$667.00 million||$1.39||11.91|
|Safeguard Scientifics||N/A||N/A||-$88.57 million||($4.34)||-3.05|
Ares Capital has higher revenue and earnings than Safeguard Scientifics. Safeguard Scientifics is trading at a lower price-to-earnings ratio than Ares Capital, indicating that it is currently the more affordable of the two stocks.
Institutional & Insider Ownership
42.8% of Ares Capital shares are owned by institutional investors. Comparatively, 76.0% of Safeguard Scientifics shares are owned by institutional investors. 0.5% of Ares Capital shares are owned by insiders. Comparatively, 2.7% of Safeguard Scientifics 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.
Volatility & Risk
Ares Capital has a beta of 0.58, meaning that its share price is 42% less volatile than the S&P 500. Comparatively, Safeguard Scientifics has a beta of 1.25, meaning that its share price is 25% more volatile than the S&P 500.
This table compares Ares Capital and Safeguard Scientifics’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
This is a summary of recent ratings and recommmendations for Ares Capital and Safeguard Scientifics, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Ares Capital presently has a consensus price target of $17.90, indicating a potential upside of 8.09%. Safeguard Scientifics has a consensus price target of $17.25, indicating a potential upside of 30.19%. Given Safeguard Scientifics’ higher probable upside, analysts plainly believe Safeguard Scientifics is more favorable than Ares Capital.
Ares Capital beats Safeguard Scientifics on 10 of the 15 factors compared between the two stocks.
About Ares Capital
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.
About Safeguard Scientifics
Safeguard Scientifics, Inc. no longer investing. It is a private equity and venture capital firm specializing in expansion financings, growth capital, management buyouts, recapitalizations, industry consolidations, corporate spinouts, growth stage, and early stage financings in Fintech sector. It initially invests in a Series A-C round and opportunistically in a seed round. The firm prefers to make investments in companies engaged in the technology, financial services, and healthcare sector. Within the technology sector, it invests in software as a service, adtech / digital media, Internet of Everything, enhanced security, predictive analytics, machine learning, artificial intelligence, enterprise software, technology enabled services, internet/new media, financial technology, cloud, mobile, social, big data, in memory, and selected business services with capital requirements of up to $25 million. Within healthcare sector, the firm invests in molecular and point-of-care diagnostics, medical devices, regenerative medicine, medical technology, digital health, healthcare technology, specialty pharmaceuticals, and selected healthcare services. It invests throughout the United States with a focus on Mid-Atlantic region, and Southeastern Canada. The firm primarily invests between $5 million and $25 million in growth equity financing and between $5 million and $10 million in early-stage financing. It typically invests in the capital structures including owner financed and bootstrapped companies, corporate division or business unit, and venture capital-backed seeking a growth partner. The firm prefers to be the largest shareholder in its portfolio companies, with ownership in the range of 20 percent to 50 percent. However, it may occasionally take a majority or smaller stake in its portfolio companies. It prefers to invest in companies having proprietary technology and intellectual property. The firm prefers to take a Board seat in its portfolio companies. The company was founded in 1953 as Lancaster Corporation and changed its name to Safeguard Scientifics, Inc. in 1981. Safeguard Scientifics, Inc. is based in Radnor, Pennsylvania with an additional office in Weston, Massachusetts.
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