Ares Capital: The Pros And Cons After Q2 FY24 Results (Archive)
ARCC’s deal activity remains robust, but slowing growth, peaking yields and average valuation warrant neutrality.
This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.
Elevator Pitch
- As the signs indicated last quarter, investment activity has been strong. However, on a run-rate basis, I believe it is slowing down in Q3 FY24.
- As expected, Ares Capital's yields seem to be peaking. Yields on incremental deals signed in July 2024 have been 40bps lower than company average levels.
- The chances of a rate cut have dramatically increased in recent days. Ares Capital, with its higher floating rate debt exposure, is well positioned to benefit.
- Valuation multiples are near the long term average, making it harder to take a directional view on the stock.
- Relative technicals vs S&P500 suggest a neutral outlook as the ratio prices are resting on top of monthly support, but in the vicinity of major 12-monthly resistance.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
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