Analyzing Ares Capital (NASDAQ:ARCC) & Nuveen Churchill Direct Lending (NYSE:NCDL)

Ares Capital (NASDAQ:ARCC) and Nuveen Churchill Direct Lending (NYSE:NCDL) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, risk, dividends and earnings.

Profitability

This table compares Ares Capital and Nuveen Churchill Direct Lending’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ares Capital	44.94%	10.48%	5.00%
Nuveen Churchill Direct Lending	43.35%	11.88%	5.25%

Risk and Volatility

Ares Capital has a beta of 0.7, suggesting that its share price is 30% less volatile than the S&P 500. Comparatively, Nuveen Churchill Direct Lending has a beta of 0.47, suggesting that its share price is 53% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Ares Capital and Nuveen Churchill Direct Lending, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ares Capital	0	2	7	0	2.78
Nuveen Churchill Direct Lending	0	3	1	0	2.25

Ares Capital presently has a consensus target price of $22.86, suggesting a potential upside of 11.88%. Nuveen Churchill Direct Lending has a consensus target price of $16.63, suggesting a potential upside of 13.79%. Given Nuveen Churchill Direct Lending’s higher possible upside, analysts clearly believe Nuveen Churchill Direct Lending is more favorable than Ares Capital.

Dividends

Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 9.4%. Nuveen Churchill Direct Lending pays an annual dividend of $1.80 per share and has a dividend yield of 12.3%. Ares Capital pays out 93.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Nuveen Churchill Direct Lending pays out 98.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional & Insider Ownership

27.4% of Ares Capital shares are owned by institutional investors. 0.5% of Ares Capital shares are owned by insiders. Comparatively, 0.6% of Nuveen Churchill Direct Lending shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Ares Capital and Nuveen Churchill Direct Lending”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ares Capital	$2.99 billion	4.82	$1.52 billion	$2.05	9.97
Nuveen Churchill Direct Lending	$224.04 million	3.22	$116.32 million	$1.82	8.03

Ares Capital has higher revenue and earnings than Nuveen Churchill Direct Lending. Nuveen Churchill Direct Lending is trading at a lower price-to-earnings ratio than Ares Capital, indicating that it is currently the more affordable of the two stocks.

Summary

Ares Capital beats Nuveen Churchill Direct Lending on 11 of the 16 factors compared between the two stocks.

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.

About Nuveen Churchill Direct Lending

Nuveen Churchill Direct Lending Corp. is a specialty finance company focused primarily on investing in senior secured loans to private equity-owned U.S. middle market companies. It has elected to be regulated as a business development company. Nuveen Churchill Direct Lending Corp. is based in NEW YORK.