With EPS Growth And More, Ares Management (NYSE:ARES) Makes An Interesting Case

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Ares Management (NYSE:ARES). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ares Management with the means to add long-term value to shareholders.

View our latest analysis for Ares Management

How Fast Is Ares Management Growing Its Earnings Per Share?

In the last three years Ares Management's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Ares Management's EPS shot up from US$1.46 to US$2.06; a result that's bound to keep shareholders happy. That's a impressive gain of 41%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Ares Management's revenue last year was revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Ares Management achieved similar EBIT margins to last year, revenue grew by a solid 77% to US$4.3b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Ares Management's future EPS 100% free.

Are Ares Management Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$18b company like Ares Management. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$147m. While that is a lot of skin in the game, we note this holding only totals to 0.8% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Is Ares Management Worth Keeping An Eye On?

You can't deny that Ares Management has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. What about risks? Every company has them, and we've spotted 4 warning signs for Ares Management (of which 2 don't sit too well with us!) you should know about.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.