• Wondering if Ares Management at around US$128.50 is a bargain or stretched? This article breaks down what the current price might be implying about the stock's value.
• The stock has risen 3.3% over the past week and 15.9% over the past month. It is still down 22.7% year to date and 19.8% over the last year, following a 57.2% gain over three years and 165.0% over five years.
• Recent coverage has focused on how Ares Management is positioned within the broader capital markets sector and how investor sentiment has shifted after a long period of strong multi year returns. This context is important when considering whether the recent pullback reflects a change in expectations or simply a reset after a strong run.
• Despite the interest around the stock, Ares Management currently scores 0 out of 6 on Simply Wall St's valuation checks. The next sections will walk through different ways to look at value and outline a more comprehensive approach to understanding what the market might be pricing in.

Ares Management scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Ares Management Excess Returns Analysis

The Excess Returns model asks a simple question: are shareholders earning more on the company’s equity than the return they could reasonably require for the risk they are taking? It compares the return on equity to the cost of equity and then capitalizes the difference into an estimated per share value.

For Ares Management, the model uses a Book Value of US$11.38 per share and a Stable EPS estimate of US$7.51 per share, based on weighted future Return on Equity estimates from 4 analysts. The implied Average Return on Equity is 31.55%, while the Cost of Equity is US$2.21 per share. That leaves an Excess Return of US$5.30 per share. The analysis also anchors on a Stable Book Value of US$23.82 per share, sourced from weighted future Book Value estimates from 2 analysts.

Putting these pieces together, the Excess Returns model points to an intrinsic value of about US$116.22 per share. Against a current share price around US$128.50, this indicates the stock trades roughly 10.6% above this estimate, so it screens as overvalued on this method.

Result: OVERVALUED

Our Excess Returns analysis suggests Ares Management may be overvalued by 10.6%. Discover 46 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Ares Management Price vs Earnings

For a profitable company, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. Higher growth potential and lower perceived risk usually support a higher P/E, while slower growth or higher risk often point to a lower, more conservative multiple.

Ares Management currently trades on a P/E of 51.59x. That sits above the Capital Markets industry average P/E of 39.53x and also above the peer group average of 18.29x. To go a step further, Simply Wall St calculates a proprietary “Fair Ratio” of 21.74x for Ares Management, which is the P/E level that might be expected given factors such as its earnings profile, industry, profit margins, market cap and specific risks.

This Fair Ratio can be more informative than a simple comparison with peers or the broad industry because it tries to align the multiple with the company’s own characteristics rather than averages that may not be a clean match. When comparing the Fair Ratio of 21.74x with the current P/E of 51.59x, the stock screens as expensive on this measure.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Ares Management Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St take the story you believe about Ares Management, link it to a set of revenue, earnings and margin assumptions, turn that into a Fair Value, then compare it with the current share price so you can see whether your story points you toward buying, holding or selling, with everything kept live as new earnings or news arrives.

On the Community page, investors can use Narratives as a simple toolkit to line up different viewpoints. For example, one investor might lean toward a higher Fair Value around US$175.66 if they agree with assumptions such as revenue growing about 11.4% a year and earnings reaching US$2.6b by 2029 on a P/E of 21.9x. Another might anchor closer to US$104.00 if they think revenue grows nearer 6.6% a year and earnings reach US$1.5b on a P/E of 22.5x. Seeing these side by side may make it easier for you to choose the Ares Management story that best matches your own expectations.

For Ares Management however, we will make it really easy for you with previews of two leading Ares Management Narratives:

Fair value in this bullish narrative: US$145.35 per share.

At a last close of US$128.50, the stock sits about 11.6% below that fair value estimate.

Revenue growth used in this narrative: 5.16% a year.

• Focuses on diversification across asset classes and regions, with a growing mix of perpetual capital and a large pool of undeployed funds supporting fee based earnings.
• Builds on analyst assumptions that revenue and profit margins improve over time, with earnings possibly reaching US$1.9b by 2029 if the business meets current expectations.
• Ties the fair value to an analyst consensus price target of US$145.35, while highlighting execution, competition, regulation and retail flows as key risks to watch.

Fair value in this more cautious narrative: US$104.00 per share.

At a last close of US$128.50, the stock stands about 23.6% above that fair value estimate.

Revenue growth used in this narrative: 6.58% a year.

• Emphasizes rising general and administrative costs, GCP integration spend and competition in private credit as potential pressures on margins and growth.
• Assumes earnings reach about US$1.5b by 2029 on a lower P/E multiple than today, reflecting concern that the market could be expecting too much from flows and private credit sentiment.
• Flags a bearish price target of US$104.00 that sits well below some analyst targets, while still acknowledging strong AUM, dry powder and global expansion as possible offsets.

Do you think there's more to the story for Ares Management? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.