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Should Value Investors Buy Ares Management (ARES) Stock?

Zacks Equity Research
First Financial (FFBC) delivered earnings and revenue surprises of 0.00% and -1.45%, respectively, for the quarter ended March 2019. Do the numbers hold clues to what lies ahead for the stock?

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company value investors might notice is Ares Management (ARES). ARES is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A.

We also note that ARES holds a PEG ratio of 1.43. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ARES's industry has an average PEG of 1.68 right now. Within the past year, ARES's PEG has been as high as 1.62 and as low as 0.96, with a median of 1.34.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ARES has a P/S ratio of 2.49. This compares to its industry's average P/S of 2.53.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Ares Management is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ARES feels like a great value stock at the moment.


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