ARCC
Ares Capital Corporation
$19.04
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 62.0% below fair value
You pay
$19.04
Bear
$35.08
Fair
$50.11
Bull
$65.14
Bear
$35.08
+84.2%
ROTCE 6.8% → 0.76x TBV
Fair
$50.11
+163.2%
ROTCE 9.1% → 1.37x TBV
Bull
$65.14
+242.1%
ROTCE 10.4% → 1.73x TBV
Key Value Driver
ROTCE (9.1%) vs. cost of equity (7.7%)
Implied Market Multiple
0.95x
Summary
Our base-case estimate uses P/Tangible Book × ROE Quality. We then blend that result with the average analyst price target of $19.00 from 32 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $50.11 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: $35.78 (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 $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