Financial Contrast: Ares Capital (NASDAQ:ARCC) and Blackstone Secured Lending Fund (NYSE:BXSL)

Ares Capital (NASDAQ:ARCC) and Blackstone Secured Lending Fund (NYSE:BXSL) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their risk, dividends, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Profitability

This table compares Ares Capital and Blackstone Secured Lending Fund’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ares Capital	37.30%	9.85%	4.59%
Blackstone Secured Lending Fund	31.63%	11.73%	5.12%

Institutional and Insider Ownership

27.4% of Ares Capital shares are owned by institutional investors. Comparatively, 36.5% of Blackstone Secured Lending Fund shares are owned by institutional investors. 0.5% of Ares Capital shares are owned by insiders. Comparatively, 0.1% of Blackstone Secured Lending Fund shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings for Ares Capital and Blackstone Secured Lending Fund, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ares Capital	0	3	8	0	2.73
Blackstone Secured Lending Fund	1	4	4	0	2.33

Ares Capital currently has a consensus price target of $20.65, indicating a potential upside of 14.53%. Blackstone Secured Lending Fund has a consensus price target of $24.88, indicating a potential upside of 5.40%. Given Ares Capital’s stronger consensus rating and higher probable upside, research analysts plainly believe Ares Capital is more favorable than Blackstone Secured Lending Fund.

Risk and Volatility

Ares Capital has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500. Comparatively, Blackstone Secured Lending Fund has a beta of 0.38, suggesting that its share price is 62% 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 10.6%. Blackstone Secured Lending Fund pays an annual dividend of $3.08 per share and has a dividend yield of 13.1%. Ares Capital pays out 117.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Blackstone Secured Lending Fund pays out 161.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation and Earnings

This table compares Ares Capital and Blackstone Secured Lending Fund”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	4.24	$1.30 billion	$1.63	11.06
Blackstone Secured Lending Fund	$1.42 billion	3.87	$563.46 million	$1.91	12.36

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

Summary

Ares Capital beats Blackstone Secured Lending Fund on 10 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 Blackstone Secured Lending Fund

Blackstone Secured Lending Fund is business development company and a Delaware statutory trust formed on March 26, 2018, and structured as an externally managed, non-diversified closed-end investment Fund. On October 26, 2018, the fund elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). In addition, the Fund elected to be treated for U.S. federal income tax purposes, as a regulated investment company (RIC), as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). The fund also intends to continue to comply with the requirements prescribed by the Code in order to maintain tax treatment as a RIC. The fund's investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. The Fund seeks to achieve its investment objective primarily through originated loans, equity and other securities, including syndicated loans, of private U.S. companies, specifically small and middle market companies, typically in the form of first lien senior secured and unitranche loans (including first out/last out loans), and to a lesser extent, second lien, third lien, unsecured and subordinated loans and other debt and equity securities.