Ares Management (NYSE:ARES) and Monroe Capital (NASDAQ:MRCC) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, risk, dividends, institutional ownership and profitability.
Ares Management pays an annual dividend of $1.28 per share and has a dividend yield of 4.6%. Monroe Capital pays an annual dividend of $1.40 per share and has a dividend yield of 12.5%. Ares Management pays out 90.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Monroe Capital pays out 89.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Management has increased its dividend for 2 consecutive years. Monroe Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.
Ares Management has a beta of 1.38, suggesting that its stock price is 38% more volatile than the S&P 500. Comparatively, Monroe Capital has a beta of 1.12, suggesting that its stock price is 12% more volatile than the S&P 500.
This is a summary of current ratings and price targets for Ares Management and Monroe Capital, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Ares Management currently has a consensus price target of $24.60, suggesting a potential downside of 12.55%. Monroe Capital has a consensus price target of $12.83, suggesting a potential upside of 14.69%. Given Monroe Capital’s higher probable upside, analysts plainly believe Monroe Capital is more favorable than Ares Management.
Valuation and Earnings
This table compares Ares Management and Monroe Capital’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Ares Management||$958.46 million||3.03||$57.02 million||$1.42||19.81|
|Monroe Capital||$58.38 million||3.92||$5.85 million||$1.57||7.13|
Ares Management has higher revenue and earnings than Monroe Capital. Monroe Capital is trading at a lower price-to-earnings ratio than Ares Management, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
60.1% of Ares Management shares are held by institutional investors. Comparatively, 21.6% of Monroe Capital shares are held by institutional investors. 151.6% of Ares Management shares are held by company insiders. Comparatively, 2.3% of Monroe Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
This table compares Ares Management and Monroe Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Ares Management beats Monroe Capital on 10 of the 17 factors compared between the two stocks.
Ares Management Company Profile
Ares Management Corporation operates as an alternative asset manager in the United States, Europe, and Asia. The company's Tradable Credit Group segment manages various types of investment funds, such as commingled and separately managed accounts for institutional investors, and publicly traded vehicles and sub-advised funds for retail investors in the tradable and non-investment grade corporate credit markets. Its Direct Lending Group segment provides financing solutions to small-to-medium sized companies. The company's Private Equity Group segment focuses on majority or shared-control investments primarily in under-capitalized companies. Its Real Estate Group segment invests in new developments and the repositioning of assets, with a focus on control or majority-control investments; and originates and invests in a range of self-originated financing opportunities for middle-market owners and operators of commercial real estate. The firm was previously known as Ares Management, L.P. Ares Management Corporation was founded in 1997 and is headquartered in Los Angeles, California with additional offices in the United States, Europe and Asia. Ares Management GP LLC is the general partner of the company.
Monroe Capital Company Profile
Monroe Capital Corporation is a business development company specializing in senior, unitranche and junior secured debt and to a lesser extent, unsecured debt and equity investments, and buyouts in middle-market companies. The fund prefers to invest in casinos and gaming, broadcasting, publishing, alcoholic beverage and tobacco distribution, oil and gas, insurance, pharmaceuticals and bio sciences, aerospace and defense, commercial printing, natural rubber, glass, container and packaging, metals and mining, and real estate. It focuses to invest in the United States and Canada. The fund focuses on companies with a maximum of $25 million in EBITDA per year.
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