Contrasting Ridgepost Capital (NYSE:RPC) & Ares Capital (NASDAQ:ARCC)

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

Insider and Institutional Ownership

27.4% of Ares Capital shares are owned by institutional investors. Comparatively, 48.0% of Ridgepost Capital shares are owned by institutional investors. 0.5% of Ares Capital shares are owned by company insiders. Comparatively, 11.8% of Ridgepost Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 9.9%. Ridgepost Capital pays an annual dividend of $0.16 per share and has a dividend yield of 2.0%. 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. Ridgepost Capital pays out 64.0% of its earnings in the form of a dividend.

Volatility & Risk

Ares Capital has a beta of 0.57, meaning that its share price is 43% less volatile than the S&P 500. Comparatively, Ridgepost Capital has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500.

Valuation and Earnings

This table compares Ares Capital and Ridgepost Capital”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ares Capital	$3.05 billion	4.56	$1.30 billion	$1.35	14.37
Ridgepost Capital	$297.35 million	2.92	$19.50 million	$0.25	31.49

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Ares Capital	30.91%	9.80%	4.50%
Ridgepost Capital	9.03%	21.02%	9.21%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Ares Capital and Ridgepost Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ares Capital	0	3	8	0	2.73
Ridgepost Capital	0	2	2	0	2.50

Ares Capital currently has a consensus price target of $20.60, indicating a potential upside of 6.19%. Ridgepost Capital has a consensus price target of $13.00, indicating a potential upside of 65.12%. Given Ridgepost Capital’s higher probable upside, analysts clearly believe Ridgepost Capital is more favorable than Ares Capital.

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 Ridgepost Capital

P10, Inc., together with its subsidiaries, operates as a multi-asset class private market solutions provider in the alternative asset management industry in the United States. The company offers private equity, venture capital, private credit, impact investing, and private credit services, as well as primary fund of funds, secondary investment, and direct and co-investments services. It also provides tax credit transaction and consulting services. The company was founded in 1992 and is headquartered in Dallas, Texas.