Head to Head Analysis: Westwood Holdings Group (NYSE:WHG) vs. Ares Capital (NASDAQ:ARCC)

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

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%

Risk & Volatility

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

Earnings and Valuation

This table compares Ares Capital and Westwood Holdings Group”s top-line 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	4.60	$1.30 billion	$1.22	15.93
Westwood Holdings Group	$97.76 million	1.82	$7.06 million	$0.81	23.08

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.

Insider and Institutional Ownership

27.4% of Ares Capital shares are held by institutional investors. Comparatively, 56.6% of Westwood Holdings Group shares are held by institutional investors. 0.5% of Ares Capital shares are held by insiders. Comparatively, 17.4% of Westwood Holdings Group shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 9.9%. 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.

Analyst Ratings

This is a summary of current ratings and price targets for Ares Capital and Westwood Holdings Group, as provided by MarketBeat.

	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 target price of $20.39, suggesting a potential upside of 4.88%. Given Ares Capital’s higher probable upside, analysts clearly believe Ares Capital is more favorable than Westwood Holdings Group.

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 firm headquartered in Dallas, Texas. Through its subsidiaries, the company provides investment advisory and asset management services to institutional investors, private wealth clients, family offices and investment vehicles. Westwood manages a range of investment strategies, including equity, income, multi-asset and alternative offerings. Its products and services are designed to address the needs of pension plans, endowments, foundations, corporations, high-net-worth individuals and other investors seeking professionally managed portfolios.