• Wondering if Ares Management at around US$125.65 is a bargain or just expensive growth priced in already? This article breaks down what the current share price might be saying about value.
• The stock is up 1.4% over the past month, but has fallen 24.5% year to date and 25.3% over the past year, even though the 3 year and 5 year returns of 48.8% and 147.3% show that longer term holders have seen very different results.
• Recent attention on Ares Management has been driven less by a single headline and more by the broader conversation around listed alternative asset managers, including how higher interest rates affect fundraising, fees and investor appetite for private credit and private equity. This mix of sector wide themes and company specific expectations helps frame why the share price has pulled back after a strong multi year run.
• Against that backdrop, the stock currently scores 0 out of 6 on Simply Wall St's valuation checks, as shown in its valuation score. The next sections will walk through traditional valuation methods before finishing with a more rounded way to think about what Ares Management might be worth.

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 looks at how much profit a company can generate over and above the return that shareholders are asking for, then capitalizes that surplus into a value per share.

For Ares Management, the model starts with an estimated Book Value of $11.38 per share and a Stable EPS of $7.51 per share, based on weighted future Return on Equity estimates from 4 analysts. The implied cost of equity is $2.20 per share, so the Excess Return is $5.32 per share. This means the model assumes earnings comfortably exceed the required return. The average Return on Equity used is 31.55%, with a Stable Book Value of $23.82 per share, based on estimates from 2 analysts.

Putting these inputs together, the Excess Returns framework produces an intrinsic value of about $117.36 per share. Compared with the recent share price around $125.65, this implies the stock trades at roughly a 7.1% premium to that estimate, which sits within a reasonable band rather than suggesting a major mispricing.

Result: ABOUT RIGHT

Ares Management is fairly valued according to our Excess Returns, but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Ares Management Price vs Earnings

For a profitable company like Ares Management, the P/E ratio is a useful shorthand because it connects what you are paying today with the earnings the business is already generating. In simple terms, higher growth expectations and lower perceived risk can justify a higher P/E, while slower growth or higher risk usually call for a lower, more conservative P/E.

Ares Management currently trades on a P/E of 50.45x. That sits above the Capital Markets industry average of 39.15x and also above the peer group average of 18.42x, which suggests the stock is priced at a premium compared with many listed alternatives in the sector.

Simply Wall St’s Fair Ratio for Ares Management is 21.91x. This is a proprietary estimate of what a reasonable P/E might be, given factors such as the company’s earnings growth profile, industry, profit margins, market cap and specific risks. Because it adjusts for those company level characteristics, the Fair Ratio aims to be more tailored than a simple comparison with broad industry or peer averages. Setting the Fair Ratio of 21.91x against the current 50.45x P/E indicates the stock trades well above that customised estimate.

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, so Narratives are introduced here as a simple way for you to write the story behind your numbers by linking your view on Ares Management's revenue, earnings and margins to a financial forecast, a Fair Value, and finally a decision when you compare that Fair Value to the current price.

On Simply Wall St's Community page, Narratives are available as an easy tool used by millions of investors. They update automatically when fresh information like earnings or news arrives, so your story keeps pace with the company instead of sitting in an old spreadsheet.

With Ares Management, for example, one investor might build a bullish Narrative closer to the upper analyst fair value around US$175.66, with assumptions nearer to revenue growth of 11.40%, profit margins of 31.79% and earnings of US$2.6b by 2029 at a future P/E of 21.90x. Another investor might lean toward the more cautious Narrative around US$104.00, with revenue growth of 6.58%, profit margins of 21.64% and earnings of US$1.5b by 2029 at a future P/E of 22.47x. Each can then judge whether the current price near US$126 makes sense against their own story.

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

Each one ties the same share price to a different set of assumptions about revenue, margins and the right P/E. Your job is simply to decide which story feels closer to how you see the business and sector.

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

Current price compared with that fair value: trading roughly 13.7% below this narrative fair value on the latest US$125.65 close.

Revenue assumption in this story: about 5.16% annual revenue growth.

• Emphasises breadth across asset classes and regions, with a larger slice of perpetual capital and a sizeable pool of undeployed capital supporting fee revenue and earnings visibility.
• Builds in rising profit margins toward about 28.2% and earnings of roughly US$1.9b by 2029, paired with a future P/E of about 24x, which is below the Capital Markets industry P/E cited earlier.
• Flags real risks around fee pressure, retail flows, regulation and execution in newer areas like data centers and sports or media, but concludes that these are manageable within a US$145.35 fair value framework.

Fair value used in this bearish narrative: about US$104.00 per share.

Current price compared with that fair value: trading roughly 20.8% above this narrative fair value on the latest US$125.65 close.

Revenue assumption in this story: about 6.58% annual revenue growth.

• Focuses on cost pressure from higher general and administrative spending, GCP integration drag and fundraising targets that may be harder to hit if private credit sentiment stays cautious.
• Builds toward earnings of about US$1.5b by 2029, with profit margins around 21.6% and a future P/E of roughly 22.5x, which together support a US$104.00 fair value closer to the bearish end of analyst targets.
• Acknowledges positives like high dry powder, global expansion and diversified fundraising, but treats them as already reflected in the share price or partly offset by fee and margin risk.

If neither extreme feels right, you can always blend elements of both or write a completely different story around revenue growth, margins, future P/E and risk. You can then see how that compares with the current price near US$125. See what the community is saying about Ares Management

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.