Ares Management Corp (NYSE: ARES)

Sector: Financial Services Industry: Asset Management CIK: 0001176948
Market Cap 25.93 Bn
P/B 14.67
P/E 57.20
P/S 7.35
ROIC (Qtr) 3.76
Div Yield % 3.34
Rev 1y % (Qtr) 46.73
Total Debt (Qtr) 12.73 Bn
Debt/Equity (Qtr) 2.84
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About

Ares Management Corp, known by its ticker symbol ARES, is a prominent global alternative investment manager, with over $418.8 billion in assets under management and a workforce of over 2,850 employees in more than 35 offices across more than 15 countries. The company's operations span various regions, including the United States, Europe, and Asia. Ares Management Corp's main business activities revolve around providing a diverse range of investment strategies, tailored to deliver attractive performance to its investor base. This group comprises...

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Investment thesis

Bull case

  • Operating cash flow of 4.56B provides strong 12.92x coverage of stock compensation 352.85M, indicating sustainable incentive practices.
  • Robust free cash flow of 4.49B exceeds capital expenditure of 65.69M by 68.39x, indicating strong organic growth funding capability.
  • Operating cash flow of 4.56B provides strong 4.10x coverage of operating expenses 1.11B, showing operational efficiency.
  • Strong free cash flow of 4.49B provides 1.35x coverage of SG&A expenses 3.33B, indicating efficient cost management.
  • Operating cash flow of 4.56B provides strong 69.39x coverage of capital expenditure 65.69M, enabling organic growth.

Bear case

  • Operating cash flow of 4.56B barely covers its investment activities of (1.85B), with a coverage ratio of -2.47, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 4.56B provides thin coverage of dividend payments of (1.64B) with a -2.78 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 1.50B provide limited coverage of acquisition spending of (1.78B), which is -0.84x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 4.49B represents just -3.37x of debt issuance (1.33B), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Operating cash flow of 4.56B is outpaced by equity issuance of (112000) (-40698.79 ratio), indicating concerning reliance on equity markets for funding operations.

Consolidated Entities Breakdown of Revenue (2024)

Peer comparison

Companies in the Asset Management
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 BLK BlackRock, Inc. 199.59 Bn 85.40 21.98 15.04 Bn
2 BN BROOKFIELD Corp /ON/ 103.94 Bn 31.52 5.64 262.97 Bn
3 AMP Ameriprise Financial Inc 88.69 Bn 55.02 7.20 5.89 Bn
4 BX Blackstone Inc. 88.51 Bn 49.39 10.93 12.89 Bn
5 KKR KKR & Co. Inc. 55.86 Bn 28.33 13.23 53.12 Bn
6 STT State Street Corp 46.52 Bn 21.77 3.91 34.72 Bn
7 NTRS Northern Trust Corp 34.14 Bn 33.31 6.71 15.64 Bn
8 RJF Raymond James Financial Inc 32.89 Bn 37.63 4.14 5.10 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.49 0.94
EV to Cash from Ops. EV/CFO -174.13 41.10
EV to Debt EV to Debt 3.16 15.28
EV to EBIT EV/EBIT 26.02 23.47
EV to EBITDA EV/EBITDA 38.28 47.80
EV to Free Cash Flow [EV/FCF] EV/FCF -127.51 38.62
EV to Market Cap EV to Market Cap 1.55 7.81
EV to Revenue EV/Rev 11.40 27.38
Price to Book Value [P/B] P/B 14.67 2.34
Price to Earnings [P/E] P/E 57.20 11.81
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.32 4.66
Dividend Payout Ratio % Div Payout % (Qtr) 183.30 -5.56
Dividend per Basic Share Div per Share (Qtr) 4.29 1.73
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 21.00 49.83
Interest Coverage Int. cover (Qtr) 2.08 25.16
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 37.56 -35.10
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -9.97 15.43
Dividend Growth (1y) % Div 1y % (Qtr) 20.51 1.65
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 7.50 -90.82
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -9.28 35.24
EBIT Growth (1y) % EBIT 1y % (Qtr) 6.78 -22.13
EBT Growth (1y) % EBT 1y % (Qtr) 40.33 -163.05
EPS Growth (1y) % EPS 1y % (Qtr) 5.88 -20.61
FCF Growth (1y) % FCF 1y % (Qtr) 240.79 220.21
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 45.54 -53.96
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.20 0.22
Cash Payout Ratio Cash Payout (Qtr) 0.36 0.36
Cash Ratio Cash Ratio 0.00 0.38
Current Ratio Current Ratio 0.00 0.86
Debt to Equity Ratio Debt/Equity (Qtr) 2.84 0.70
Interest Cover Ratio Int Coverage (Qtr) 2.08 25.16
Times Interest Earned Times Interest Earned (Qtr) 2.08 25.16
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 35.10 -114.76
EBIT Margin % EBIT Margin % (Qtr) 32.09 -127.24
EBT Margin % EBT Margin % (Qtr) 16.63 -150.97
Gross Margin % Gross Margin % (Qtr) 100.00 67.88
Net Profit Margin % Net Margin % (Qtr) 10.30 -148.68