Assessing Ares Management After 16% Drop and Industry Competition Heats Up in 2025

If you’ve been eyeing Ares Management, you’re not alone. Investors are watching closely after some recent twists in its stock price. With shares closing at $148.64, the company is down 7.0% over the past week and 16.2% in the last month. Year to date, Ares Management is off by 16.9%. Those kinds of short-term drops will always raise questions, especially since Ares was nearly flat over the past year but has delivered an eye-popping 163.9% return over three years and 292.0% over five years. The way the stock has moved suggests that investors are recalibrating their outlook, possibly in response to shifting markets or changing risk appetites.

So, is Ares Management undervalued, overvalued, or priced just right? Based on standard valuation checks, Ares scores a 1 out of a possible 6 for being undervalued. That means just one key indicator is currently flashing “cheap,” while the others aren’t quite as convincing. But as you probably know, looking at numbers alone rarely tells the whole story. Next, let’s unpack the different valuation lenses analysts use. Then, stick around for a smarter take on what those scores might be missing.

Ares Management scores just 1/6 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 focuses on how efficiently a company uses its equity, specifically measuring the returns earned above the cost of capital. Instead of relying solely on earnings or cash flows, this approach is based on the quality of deployed capital and its ongoing profitability.

For Ares Management, the numbers are telling. The company has a Book Value of $13.23 per share and a Stable EPS of $1.94 per share, determined using the median Return on Equity (ROE) of the past 5 years. The Cost of Equity stands at $0.93 per share, meaning the firm is generating an Excess Return of $1.01 per share. Its average ROE is 20.47%. Analysts use a Stable Book Value of $9.47 per share, also tied to the 5-year median.

Where does this leave the stock? According to the Excess Returns Model, Ares Management’s estimated intrinsic value is well below the current share price, suggesting the stock is 508.5% overvalued. If you rely on this valuation method, the stock’s run-up has significantly outpaced the underlying excess returns it is producing.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Ares Management.

Our Excess Returns analysis suggests Ares Management may be overvalued by 508.5%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Ares Management Price vs Earnings

For companies like Ares Management that generate substantial profits, the price-to-earnings (PE) ratio is a widely used and relevant valuation tool. It helps investors quickly assess how much they are paying for each dollar of earnings, making it a go-to metric when comparing well-established, profitable firms.

Interpreting a “normal” or “fair” PE ratio depends largely on expectations for earnings growth and the risks involved. Companies with faster expected growth or lower perceived risk typically warrant higher PE multiples. On the other hand, declining firms or those facing headwinds may trade at a discount.

Currently, Ares Management sports a PE ratio of 88.3x, which is far above the Capital Markets industry average of 25.5x and the peer average of 14.5x. At first glance, this could make Ares look far more expensive compared to its competitors.

This is where Simply Wall St’s Fair Ratio comes in. It estimates the PE multiple one would expect for Ares given its unique blend of earnings growth, profit margins, industry dynamics, market capitalization, and risk factors. In this case, the Fair Ratio is 27.2x, substantially lower than the company’s actual ratio. By factoring in more than just broad industry averages, the Fair Ratio offers a more tailored and meaningful benchmark for valuation.

With Ares Management’s PE ratio (88.3x) far exceeding its Fair Ratio (27.2x), the stock appears to be significantly overvalued by this metric.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Ares Management Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story—your perspective on Ares Management’s potential, based on your assumptions about its fair value, future revenue, earnings, and margins. Rather than just crunching numbers, Narratives connect the company’s story to a forecast of its finances and ultimately to a fair value estimate.

On Simply Wall St’s platform, millions of investors use Narratives as an accessible tool within the Community page to frame and share their investment thesis. Narratives make it easy to see whether your forecasted Fair Value compares favorably or unfavorably to the latest share price, helping you decide when to consider buying or selling.

Crucially, these Narratives update automatically as news breaks or when new earnings become available, ensuring your story always reflects the latest information. For example, while some investors see Ares Management’s global expansion and diversified asset base as supporting a bullish price target of $215, others focus on industry competition and margin pressures to justify a more cautious $160 target. With Narratives, you can align your investment decisions with your own understanding of Ares Management’s changing story and check how your outlook compares with the community at any time.

Do you think there's more to the story for Ares Management? Create your own Narrative to let the Community know!

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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