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AMG vs. ARES: Which Stock Should Value Investors Buy Now?

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Zacks Equity Research
·2 min read
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Investors interested in stocks from the Financial - Investment Management sector have probably already heard of Affiliated Managers Group (AMG) and Ares Management (ARES). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Affiliated Managers Group has a Zacks Rank of #2 (Buy), while Ares Management has a Zacks Rank of #3 (Hold). This means that AMG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

AMG currently has a forward P/E ratio of 9.50, while ARES has a forward P/E of 25.11. We also note that AMG has a PEG ratio of 0.59. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ARES currently has a PEG ratio of 1.47.

Another notable valuation metric for AMG is its P/B ratio of 2.10. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ARES has a P/B of 6.62.

These are just a few of the metrics contributing to AMG's Value grade of A and ARES's Value grade of D.

AMG is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that AMG is likely the superior value option right now.


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