Will Ares’ Above-Peer Growth and 21.8x Multiple Change Ares Management’s (ARES) Narrative?

• Ares Management recently reported that over the past two years its annual revenue growth reached 24.3%, while its earnings per share increased 19.5% annually over five years, outpacing peers.
• With the shares currently valued at 21.8x forward earnings, the combination of rapid growth and this valuation level is drawing fresh investor attention to the firm’s competitive position.
• We’ll now examine how Ares Management’s strong revenue and earnings momentum may influence its existing investment narrative and longer-term outlook.

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Ares Management Investment Narrative Recap

To own Ares Management, you need to believe it can convert its strong alternative assets franchise into durable fee and earnings growth despite increasing competition and fee pressure. The latest update on 24.3% annual revenue growth and 19.5% EPS growth supports the near term earnings momentum catalyst, but does not meaningfully change the key risk around future margin compression as rivals in private credit and alternatives compete more aggressively on price.

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The recent approval of a US$750,000,000 Class A share buyback program is the most relevant development here, because it sits alongside strong reported growth and a 21.8x forward P/E. While Ares has not been active under the authorization so far, the flexibility to repurchase shares could interact with fundraising, perpetual capital growth and deployment of dry powder, potentially amplifying the impact of any swings in sentiment toward its fee and earnings outlook.

Yet investors should not ignore how rising competition and potential fee pressure could eventually interact with Ares’ current growth story and valuation multiples, especially if…

Read the full narrative on Ares Management (it’s free!)

Ares Management’s narrative projects $6.9 billion revenue and $1.9 billion earnings by 2029.

Uncover how Ares Management’s forecasts yield a $145.24 fair value, a 4% upside to its current price.

Exploring Other Perspectives

Some of the lowest ranked analysts were already more cautious, assuming revenue of about US$6.4 billion and earnings of US$1.8 billion by 2029, so their view of rising general and administrative costs and fundraising risk may now look very different in light of Ares’ recent outperformance.

Explore 4 other fair value estimates on Ares Management – why the stock might be worth as much as 20% more than the current price!

Reach Your Own Conclusion

Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts.

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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.

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