Comparing Ares Capital (NASDAQ:ARCC) & Artisan Partners Asset Management (NYSE:APAM)

Artisan Partners Asset Management (NYSE:APAM) and Ares Capital (NASDAQ:ARCC) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, risk, dividends, analyst recommendations, institutional ownership, profitability and earnings.

Volatility and Risk

Artisan Partners Asset Management has a beta of 1.67, suggesting that its stock price is 67% more volatile than the S&P 500. Comparatively, Ares Capital has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500.

Institutional & Insider Ownership

86.5% of Artisan Partners Asset Management shares are held by institutional investors. Comparatively, 27.4% of Ares Capital shares are held by institutional investors. 11.3% of Artisan Partners Asset Management shares are held by company insiders. Comparatively, 0.5% of Ares Capital shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Artisan Partners Asset Management and Ares Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Artisan Partners Asset Management	$1.20 billion	2.46	$290.32 million	$4.12	8.81
Ares Capital	$3.05 billion	4.56	$1.30 billion	$1.35	14.35

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

Analyst Recommendations

This is a summary of recent recommendations and price targets for Artisan Partners Asset Management and Ares Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Artisan Partners Asset Management	1	4	1	0	2.00
Ares Capital	0	3	8	0	2.73

Artisan Partners Asset Management presently has a consensus price target of $38.00, indicating a potential upside of 4.64%. Ares Capital has a consensus price target of $20.60, indicating a potential upside of 6.35%. Given Ares Capital’s stronger consensus rating and higher possible upside, analysts plainly believe Ares Capital is more favorable than Artisan Partners Asset Management.

Profitability

This table compares Artisan Partners Asset Management and Ares Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Artisan Partners Asset Management	24.08%	73.11%	21.93%
Ares Capital	30.91%	9.80%	4.50%

Dividends

Artisan Partners Asset Management pays an annual dividend of $3.20 per share and has a dividend yield of 8.8%. Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 9.9%. Artisan Partners Asset Management pays out 77.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Capital pays out 142.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Ares Capital beats Artisan Partners Asset Management on 9 of the 16 factors compared between the two stocks.

About Artisan Partners Asset Management

Artisan Partners Asset Management Inc. is publicly owned investment manager. It provides its services to pension and profit sharing plans, trusts, endowments, foundations, charitable organizations, government entities, private funds and non-U.S. funds, as well as mutual funds, non-U.S. funds and collective trusts. It manages separate client-focused equity and fixed income portfolios. The firm invests in the public equity and fixed income markets across the globe. It invests in growth and value stocks of companies across all market capitalization. For fixed income component of its portfolio the firm invests in non-investment grade corporate bonds and secured and unsecured loans. It employs fundamental analysis to create its portfolios. Artisan Partners Asset Management Inc. was founded in 1994 and is based in Milwaukee, Wisconsin with additional offices in Atlanta, Georgia; New York City; San Francisco, California; Leawood, Kansas; and London, United Kingdom.

About Ares Capital

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.