ARCC
Ares Capital Corporation
$18.59
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 63.5% below fair value
You pay
$18.59
Bear
$35.68
Fair
$50.97
Bull
$66.26
Bear
$35.68
+91.9%
ROTCE 6.8% → 0.74x TBV
Fair
$50.97
+174.2%
ROTCE 9.1% → 1.35x TBV
Bull
$66.26
+256.4%
ROTCE 10.4% → 1.71x TBV
Key Value Driver
ROTCE (9.1%) vs. cost of equity (7.8%)
Implied Market Multiple
0.93x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $21.88 from 32 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $50.97 per share.
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: $35.42 (44% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $21.88 (from 32 analysts). Our estimate is 190% 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