ARCC
Ares Capital Corporation
$18.41
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 71.0% below fair value
You pay
$18.41
Bear
$44.41
Fair
$63.44
Bull
$82.47
Bear
$44.41
+141.2%
ROTCE 6.8% → 0.71x TBV
Fair
$63.44
+244.6%
ROTCE 9.1% → 1.29x TBV
Bull
$82.47
+348.0%
ROTCE 10.4% → 1.64x TBV
Adjust Assumptions
9.1%
7.9%
Key Value Driver
ROTCE (9.1%) vs. cost of equity (7.9%)
Implied Market Multiple
0.92x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (32 analysts)
$19.00
Divergence from AlphaVal
234%
Summary
With ROTCE of 9.1% vs. 7.9% cost of equity, fair P/TBV is 1.29x on $19.94 tangible book, implying $63.44 per share. DDM cross-check: $31.03.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Dividend-based valuation: $31.03 (51% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $19.00 (from 32 analysts). Our estimate is 234% above the consensus -- consider that gap carefully.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly