Ares Capital (NASDAQ:ARCC – Get Free Report) and Trinity Capital (NASDAQ:TRIN – Get Free Report) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, analyst recommendations and dividends.
Earnings & Valuation
This table compares Ares Capital and Trinity Capital”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Ares Capital | $2.99 billion | 4.84 | $1.52 billion | $2.00 | 10.10 |
| Trinity Capital | $237.69 million | 4.84 | $115.60 million | $2.19 | 6.94 |
Analyst Recommendations
This is a summary of current ratings and price targets for Ares Capital and Trinity Capital, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Ares Capital | 0 | 3 | 7 | 0 | 2.70 |
| Trinity Capital | 1 | 1 | 5 | 0 | 2.57 |
Ares Capital presently has a consensus price target of $22.25, indicating a potential upside of 10.15%. Trinity Capital has a consensus price target of $16.44, indicating a potential upside of 8.14%. Given Ares Capital’s stronger consensus rating and higher possible upside, research analysts clearly believe Ares Capital is more favorable than Trinity Capital.
Institutional & Insider Ownership
27.4% of Ares Capital shares are held by institutional investors. Comparatively, 24.6% of Trinity Capital shares are held by institutional investors. 0.5% of Ares Capital shares are held by insiders. Comparatively, 6.4% of Trinity Capital shares are held by 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.
Profitability
This table compares Ares Capital and Trinity Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Ares Capital | 45.16% | 10.08% | 4.80% |
| Trinity Capital | 50.49% | 15.51% | 7.00% |
Volatility and Risk
Ares Capital has a beta of 0.59, meaning that its stock price is 41% less volatile than the S&P 500. Comparatively, Trinity Capital has a beta of 0.53, meaning that its stock price is 47% less volatile than the S&P 500.
Dividends
Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 9.5%. Trinity Capital pays an annual dividend of $2.04 per share and has a dividend yield of 13.4%. Ares Capital pays out 96.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Trinity Capital pays out 93.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Trinity Capital has increased its dividend for 1 consecutive years. Trinity Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Summary
Trinity Capital beats Ares Capital on 9 of the 17 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 Trinity Capital
Trinity Capital Inc. is a business development company. It is a venture capital firm specializing in venture debt to growth stage companies looking for loans and/or equipment financing. Trinity Capital Inc. was founded in 2019 is based in Phoenix, Arizona with additional offices in the United States.
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