Ares Management Corporation

Investment Analysis: Ares Management (ARES)

Technical Analysis: ARES is in a pronounced downtrend, having significantly underperformed the market with steep recent losses. The stock appears oversold after a deep drawdown, but clear technical support levels are not yet evident, suggesting continued high volatility and potential for further weakness.

Fundamental Analysis: Despite strong revenue growth and a robust gross margin, profitability has become highly volatile, with a sharp drop in net margin. The company's financial health is adequate for now, but a high payout ratio and a very low return on equity indicate operational challenges in converting top-line performance into shareholder value.

Valuation: The stock appears significantly overvalued based on exceptionally high forward earnings multiples and a negative growth projection. The extreme EV/EBITDA ratio suggests current market expectations are disconnected from near-term fundamental performance.

Risk Assessment: ARES carries high volatility risk, moving more sharply than the market, and its unusual short interest status is an anomaly that warrants further scrutiny. Investors face substantial downside risk in volatile market conditions.

Recommendation: HOLD/AVOID. While ARES possesses strong core operations, its current valuation is difficult to justify given the volatility in profitability and negative earnings growth outlook. The significant technical weakness and high volatility suggest it is prudent to wait for more stable fundamental performance and a more reasonable valuation entry point before considering an investment. For existing holders, monitoring Q1 2026 results for margin stabilization is crucial.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the comprehensive analysis provided, here is a 12-month outlook for Ares Management (ARES):

The primary catalyst for a potential recovery hinges on the company demonstrating improved operational execution, specifically by stabilizing its net margins and proving it can convert strong revenue growth into consistent shareholder value, with upcoming earnings reports being critical for rebuilding investor confidence. However, significant risks dominate the outlook, including its unjustifiably high valuation, persistent profitability volatility, and the absence of clear technical support, which leaves the stock vulnerable to further downside, especially in a turbulent market. Given the disconnect between price and fundamentals and the lack of a visible positive catalyst, the prudent expectation is for continued underperformance or sideways movement in a wide range, making a definitive target price challenging; investors should await a more attractive risk-reward profile, likely at a substantially lower price.

Wall Street Consensus

Most Wall Street analysts are optimistic about Ares Management Corporation's 12-month outlook, with consensus target around $129.85, indicating expected upside potential.

Overall, ARES has investment potential but also faces challenges. Here are key factors to weigh before investing.

ARES has demonstrated substantial weakness with significant declines across multiple timeframes amid high volatility.

The stock has experienced steep losses over both one month (-20.42%) and three months (-12.54%), substantially underperforming the market by 14.39% during the latter period, reflecting pronounced selling pressure. This underperformance is consistent with the stock's high beta of 1.524, indicating it has fallen more sharply than the broader market during the recent downturn.

Currently trading at $129.85, ARES sits approximately 33.5% below its 52-week high and 17.4% above its low. Given the severe 1-year maximum drawdown of -36.79% and the recent steep decline, the stock appears to be in an oversold condition, although it remains well above its absolute lows.

Revenue & Profitability ARES demonstrated strong revenue growth with Q4 2025 revenue reaching $1.77 billion, up from $1.66 billion in Q3 2025. However, profitability metrics show volatility, with net profit margin dropping sharply to 3.1% in Q4 from 17.4% in Q3, primarily due to increased other expenses and higher interest costs. The company maintains a robust gross profit margin of 72.6%, indicating strong pricing power in its core operations.

Financial Health The company's interest coverage ratio of 2.8 suggests adequate ability to service debt obligations, though this represents a decline from previous periods. With cash per share of $6.78, ARES maintains reasonable liquidity, though the absence of current ratio data limits full working capital assessment. The elevated payout ratio of 4.6 indicates significant capital returns to shareholders relative to earnings.

Operational Efficiency ARES shows modest operational efficiency with a return on equity of 0.63%, reflecting challenges in translating revenue growth into shareholder returns. The absence of asset turnover data prevents comprehensive efficiency analysis, but the price-to-book ratio of 4.1 suggests the market values the company's assets well above their carrying value. The enterprise value multiple of 113.5 indicates high market expectations for future performance.

Based on the available metrics, ARES appears significantly overvalued. Its trailing P/E of 30.16 is high for an asset manager, but the forward P/E of over 164 is exceptionally elevated, indicating market expectations of a severe near-term earnings decline. This concern is compounded by an extremely high EV/EBITDA of 113.5 and a negative PEG ratio, which signals that the company's earnings growth is not justifying its current price.

A peer comparison cannot be performed quantitatively due to the unavailability of industry average data. However, the provided valuation multiples are exceptionally high in an absolute sense and would likely be at a substantial premium to industry norms. This analysis is therefore based solely on the intrinsic weakness signaled by the negative growth projection and excessive earnings multiples.

Volatility Risk: ARES demonstrates elevated volatility risk with a beta of 1.524, indicating it is expected to be approximately 52% more volatile than the broader market. This volatility is confirmed by a significant one-year maximum drawdown of -36.79%, highlighting substantial downside risk and potential for large losses during market downturns. Investors must be prepared for considerable price swings relative to the overall market.

Other Risks: The recorded short interest of "None" is highly unusual and warrants caution, as it may indicate either a data-reporting issue or a security that is exceptionally difficult to borrow. While this nullifies the immediate risk of a short squeeze, it raises potential concerns over liquidity or structural complexities not present in typical equities. This characteristic suggests investors should investigate the underlying reasons for this anomaly.