The shares of Ares Capital Corporation (NASDAQ:ARCC) and Invitation Homes Inc. (NYSE:INVH) were among the active stocks of the last trading sessions. Ares Capital Corporation (NASDAQ:ARCC) declined to -1.33% closing at the price of $16.38 whereas the shares of Invitation Homes Inc. (NYSE:INVH) declined -3.64% with the decrease of -0.8 points closing at the price of $21.17. Ares Capital Corporation has currently increase 2.6% in its stock over the period of 6-months while its rival Invitation Homes Inc. subtracted -6.24% in the previous 6-months.
Now we have to analyze the facts that if the stocks were worthy off investors’ money? The facts to analyze here are risks, profitability, returns and price trends.
Returns and Profitability
Profitability and returns are the main reason of investment, the investors are looking for profits that they get and return they should expect over the period of time.
The first and foremost return that is considered while making an investment is the ROI or Return on Investment. The ROI is the ratio between the profit against the cost of investment. Currently the ROI of Ares Capital Corporation (NASDAQ:ARCC) is 4.2% while the ROI of Invitation Homes Inc. (NYSE:INVH) is 0.7%. Another figure that is to be considered while analyzing the profitability of a share is its EBITDA margin, ARCC’s EBITDA Margin is 13.21 whereas INVH’s is 27.72.
Both the profitability ratios suggest a mixed sentiment for Ares Capital Corporation (NASDAQ:ARCC) and Invitation Homes Inc. (NYSE:INVH).
EPS & Surprise Factor
Ares Capital Corporation (NASDAQ:ARCC) reported $0.39/share EPS for the previous quarter where analysts were predicting an EPS to be $0.39/share Thus meeting the analyst Estimates with a Surprise Factor of 0 Percent. While, Invitation Homes Inc. (NYSE:INVH) reported EPS of $-0.03/share in the last quarter. The analysts projected EPS of $-0.01/share depicting a Surprise of -200 Percent.
Taking a look at Earnings per Share, Ares Capital Corporation tends to be beating the analyst estimates more than Invitation Homes Inc.. so ARCC is more profitable than INVH.
Technical Analysis of Ares Capital Corporation & Invitation Homes Inc.
Moving average convergence divergence (MACD) shows that Ares Capital Corporation (NASDAQ:ARCC) is on a PRICE RELATIVITY trend While Invitation Homes Inc. (NYSE:INVH) is on PRICE RELATIVITY trend. The trend for the past 10-days shows that the Ares Capital Corporation was in BEARISH territory and Invitation Homes Inc. was in BEARISH territory.
ARCC’s current statistics gauge that the stock candle is BEARISH with HIGH volatility. While INVH’s candle is BEARISH with HIGH.
EPS Growth Rate: ARCC’s 3% versus INVH’s 3.8%
Another shareholder value can be analyzed through the EPS growth rate; the next 5 years EPS growth rate is predicted by the analysts after the analyzing the previous trends. The next 5 year EPS growth rate of Ares Capital Corporation (NASDAQ:ARCC) is predicted at 3% while Invitation Homes Inc. (NYSE:INVH) stands at 3.8%. These numbers suggest that INVH is more suitable investment in terms of EPS growth rate.
Financial Risk and Liquidity Concerns
The current ratio and the debt ratio are the two ratios that show the investor how quickly the company is able to payout its debt and how quickly it can cover its obligations. The current ratio of ARCC stands at 0 while INVH is at 0 whereas the debt ratio of the prior is 0.62 while the debt ratio of the later is 1.14.
The values of the both ratios suggest that INVH is more suitable investment when the liquidity and risk is the main concern.
While making an investment, another main factor to consider before investing is the analyst recommendation on the scale of 1 to 5 where 1 is strong buy, 2 is buy, 3 is hold, 4 is Sell and 5 is strong sell. Analyst recommend 1.8 for ARCC and 1.7 for INVH which means ARCC has Buy rating whereas INVH has Buy rating.
Another recommendation of analyst that is to be considered worthy is the price target. The mare price or price trend does not suggest the suitability of a stock. The price target set by analyst is also to be considered while investing as it suggests to what extent the stock will rise or fall in the near future. The price target set for ARCC is $18.47 which is 11.32% of its current price while INVH has price target of 25.97 which is 18.48% of its current price.
Valuation is the process of determining the company’s worth for an investor, the valuation ratios give an insight to that worthiness.
ARCC currently has price to earning P/E ratio of 8.05 whereas INVH has 0 while the forward P/E ratio for the prior stands at 9.7 and for the later it depicts the value of 230.11.
The price to Book P/B for ARCC is 0.96, Price to Sale is at 5.61 and for INVH these ratios stand at 1.31 and 7.75.