Even though Ares (currently trading at $148.64 per share) has gained 20.6% over the last six months, it has lagged the S&P 500’s 34.7% return during that period. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Taking into account the weaker price action, does ARES warrant a spot on your radar, or is it better left off your list? Find out in our full research report, it’s free for active Edge members.
Why Are We Positive On ARES?
With roots in the leveraged finance group of Apollo Management, Ares Management (NYSE: ARES) is an alternative investment firm that manages private equity, credit, real estate, and infrastructure assets for institutional and high-net-worth clients.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
Luckily, Ares’s revenue grew at an excellent 19.7% compounded annual growth rate over the last five years. Its growth surpassed the average financials company and shows its offerings resonate with customers.
2. Fee-Related Earnings Jumped Higher
Revenue trends matter, but the durability of profits is what separates winners from losers. For asset managers, fee-related earnings strip away the noise of performance fees and investment income to reveal the core profitability of their fee-based business model. This represents the steady, predictable earnings that investors can count on.
Ares’s annual fee-related earnings growth over the last five years was 32.8%, an elite result.
3. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Ares’s EPS grew at a remarkable 17.3% compounded annual growth rate over the last five years. This performance was better than most financials businesses.
Final Judgment
These are just a few reasons Ares is a rock-solid business worth owning. With its shares underperforming the market lately, the stock trades at 26.2× forward P/E (or $148.64 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More Than Ares
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