Ares Capital (ARCC) vs. Rand Capital (RAND) Head-To-Head Survey

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Ares Capital (NASDAQ:ARCC) and Rand Capital (NASDAQ:RAND) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their valuation, institutional ownership, analyst recommendations, risk, profitability, dividends and earnings.

Institutional & Insider Ownership

40.5% of Ares Capital shares are owned by institutional investors. Comparatively, 17.9% of Rand Capital shares are owned by institutional investors. 0.5% of Ares Capital shares are owned by company insiders. Comparatively, 12.3% of Rand Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Ares Capital and Rand Capital’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ares Capital $1.16 billion 6.44 $667.00 million $1.39 12.61
Rand Capital $1.46 million 10.82 -$710,000.00 N/A N/A

Ares Capital has higher revenue and earnings than Rand Capital.

Risk & Volatility

Ares Capital has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500. Comparatively, Rand Capital has a beta of -0.13, indicating that its stock price is 113% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Ares Capital and Rand Capital, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Capital 0 0 7 0 3.00
Rand Capital 0 0 0 0 N/A

Ares Capital presently has a consensus price target of $18.14, indicating a potential upside of 3.50%. Given Ares Capital’s higher probable upside, research analysts plainly believe Ares Capital is more favorable than Rand Capital.

Dividends

Ares Capital pays an annual dividend of $1.56 per share and has a dividend yield of 8.9%. Rand Capital does not pay a dividend. Ares Capital pays out 112.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Ares Capital and Rand Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ares Capital 72.13% 9.34% 5.43%
Rand Capital -55.79% 0.14% 0.11%

Summary

Ares Capital beats Rand Capital on 10 of the 14 factors compared between the two stocks.

Ares Capital Company Profile

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.

Rand Capital Company Profile

Rand Capital Corporation is a business development company specializing in venture capital and private equity investments. The firm prefers to make investments through equity or debt instruments in early venture, expansion stage, and in small to medium-sized privately held companies. It generally lends to more mature companies. The firm does not prefer to invest in real estate sector. It invests in companies that are engaged in the exploitation of new or unique products, technologies, or services. The firm invests in healthcare, consumer products, manufacturing, software, and professional services. It seeks to invest in companies based in the Western and Upstate New York region and its surrounding states with focus on Buffalo and Niagara region. The firm may invest in region within three to five hour drives from Western New York including Canada. It typically invests between $0.5 million and $1.5 million and the total investment in rounds is between $1 million and $5 million. The firm seeks to invest up to maximum of $3 million total per company as part of follow-on investments. It invest in startups and companies having annual revenue up to $10 million. The firm seeks to be a lead investor in companies within its geographical area and participates in syndicate/co-invest with other investors outside it. It prefers to invest in businesses that are unique or possess proprietary right. The firm prefers to be a minority investor and seeks to take a Board seat in its portfolio companies. It typically holds its investments for a period of five to seven years. Rand Capital Corporation was founded in 1969 and is based in Buffalo, New York.

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