• Wondering if Ares Management at around US$133.88 is starting to look appealing, or if the recent volatility is a warning sign for value focused investors like you?
• The stock has climbed 2.6% over the last 7 days, but that sits against a 21.2% decline over 30 days, a 19.5% drop year to date and a 26.1% decline over the past year. This is despite 3 year and 5 year returns of 75.4% and 201.9% respectively.
• These moves come as Ares Management continues to sit in the spotlight as a major alternative asset manager, with investors reacting to ongoing market headlines around private credit, infrastructure and institutional capital flows. While this article is not tied to a specific recent announcement, it gives you a chance to step back from the noise and look at what the current share price may imply about the company’s value.
• On our checks, Ares Management scores just 1 out of 6 for being undervalued. Next we will compare different valuation approaches and, by the end of the article, look at a more complete way of thinking about what the market is pricing in.

Ares Management scores just 1/6 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 looks at what Ares Management earns on its equity compared with the return investors require, then adds the value of those “extra” returns to today’s book value per share.

On this approach, Ares Management starts with a book value of US$13.68 per share and a stable earnings figure of US$6.27 per share, based on weighted future Return on Equity estimates from 4 analysts. The model applies a cost of equity of US$1.96 per share, which implies an excess return of about US$4.32 per share. That excess is driven by an average Return on Equity of 29.90% and a projected stable book value of US$20.99 per share, using estimates from 2 analysts.

Putting this into the Excess Returns framework, the intrinsic value comes out at about US$93.91 per share, while the recent share price is around US$133.88. That gap suggests the stock is about 42.6% above the Excess Returns estimate. On this model, Ares Management screens as overvalued rather than a value opportunity at the current price.

Result: OVERVALUED

Our Excess Returns analysis suggests Ares Management may be overvalued by 42.6%. Discover 53 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 like Ares Management, the P/E ratio is a straightforward way to see how much you are paying for each dollar of earnings. Higher growth expectations or lower perceived risk usually justify a higher P/E, while slower growth or higher risk often support a lower, more conservative multiple.

Ares Management currently trades on a P/E of about 69.23x. That sits well above the Capital Markets industry average of around 23.12x and also above the peer group average of roughly 36.26x. On a simple comparison with peers or the wider industry, the shares look expensive on earnings.

Simply Wall St’s Fair Ratio for Ares Management is 23.32x. This is a proprietary estimate of what the P/E might reasonably be, based on factors such as the company’s earnings growth profile, profit margins, market cap, risk characteristics and its industry. That makes it more tailored than a basic peer or industry comparison, which does not adjust for these differences. When you set the current P/E of 69.23x against the Fair Ratio of 23.32x, Ares Management screens as trading well above what the model suggests is a more typical level.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 23 top founder-led companies.

Upgrade Your Decision Making: Choose your Ares Management Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce Narratives, where you set a clear story about Ares Management, link that story to specific forecasts for revenue, earnings and margins, and the Simply Wall St platform on the Community page turns it into a Fair Value you can compare with the current price. It updates automatically when fresh news or earnings arrive and lets you see how different views can be. For example, one investor may build a cautious case around a Fair Value near US$125.00, while another may see a much stronger case closer to US$217.00. You can then decide which Narrative you agree with and how that lines up with your own buy or sell decisions.

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.