Financial Comparison: Eaton Vance Enhanced Equity Income Fund (NYSE:EOI) versus Ares Capital (NASDAQ:ARCC)

Eaton Vance Enhanced Equity Income Fund (NYSE:EOI) and Ares Capital (NASDAQ:ARCC) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, valuation, dividends, risk, institutional ownership, analyst recommendations and profitability.

Analyst Ratings

This is a summary of recent ratings and target prices for Eaton Vance Enhanced Equity Income Fund and Ares Capital, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Eaton Vance Enhanced Equity Income Fund	0	0	0	0	0.00
Ares Capital	0	3	8	0	2.73

Ares Capital has a consensus price target of $20.40, indicating a potential upside of 2.95%. Given Ares Capital’s stronger consensus rating and higher probable upside, analysts clearly believe Ares Capital is more favorable than Eaton Vance Enhanced Equity Income Fund.

Institutional & Insider Ownership

27.4% of Ares Capital shares are held by institutional investors. 0.5% of Ares Capital shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares Eaton Vance Enhanced Equity Income Fund and Ares Capital”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Eaton Vance Enhanced Equity Income Fund	$97.15 million	N/A	N/A	N/A	N/A
Ares Capital	$3.05 billion	4.66	$1.30 billion	$1.35	14.68

Ares Capital has higher revenue and earnings than Eaton Vance Enhanced Equity Income Fund.

Profitability

This table compares Eaton Vance Enhanced Equity Income Fund and Ares Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Eaton Vance Enhanced Equity Income Fund	N/A	N/A	N/A
Ares Capital	30.91%	9.80%	4.50%

Dividends

Eaton Vance Enhanced Equity Income Fund pays an annual dividend of $1.73 per share and has a dividend yield of 8.6%. Ares Capital pays an annual dividend of $1.92 per share and has a dividend yield of 9.7%. Ares Capital pays out 142.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Ares Capital beats Eaton Vance Enhanced Equity Income Fund on 10 of the 11 factors compared between the two stocks.

About Eaton Vance Enhanced Equity Income Fund

Eaton Vance Enhanced Equity Income Fund is a closed ended equity mutual fund launched and managed by Eaton Vance Management. The fund invests in the public equity markets of the United States. It seeks to invest in stocks of companies operating across diversified sectors. The fund invests in the stocks of large-cap and mid-cap companies with a focus on investing in companies with above average growth and financial condition against valuation in selecting individual securities. It benchmarks the performance of its portfolio against S&P 500 Index. Eaton Vance Enhanced Equity Income Fund was formed on October 29, 2004 and is domiciled in the United States.

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.