Intrinsic value of Ares Management - ARES

Previous Close

$18.50

  Intrinsic Value

$118.61

stock screener

  Rating & Target

str. buy

+541%

Previous close

$18.50

 
Intrinsic value

$118.61

 
Up/down potential

+541%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as ARES.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of ARES stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  47.30
  44.30
  40.37
  36.83
  33.65
  30.78
  28.21
  25.89
  23.80
  21.92
  20.23
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.29
  7.06
  6.85
Revenue, $m
  1,199
  1,730
  2,429
  3,323
  4,441
  5,809
  7,447
  9,375
  11,606
  14,149
  17,011
  20,193
  23,693
  27,507
  31,630
  36,056
  40,776
  45,784
  51,074
  56,640
  62,479
  68,589
  74,967
  81,617
  88,541
  95,744
  103,232
  111,015
  119,103
  127,507
  136,243
Variable operating expenses, $m
 
  950
  1,328
  1,812
  2,417
  3,157
  4,043
  5,086
  6,293
  7,669
  9,217
  10,924
  12,818
  14,881
  17,112
  19,506
  22,059
  24,769
  27,631
  30,642
  33,801
  37,106
  40,557
  44,154
  47,900
  51,796
  55,847
  60,058
  64,433
  68,980
  73,706
Fixed operating expenses, $m
 
  371
  380
  390
  400
  410
  420
  430
  441
  452
  463
  475
  487
  499
  511
  524
  537
  551
  565
  579
  593
  608
  623
  639
  655
  671
  688
  705
  723
  741
  759
Total operating expenses, $m
  1,016
  1,321
  1,708
  2,202
  2,817
  3,567
  4,463
  5,516
  6,734
  8,121
  9,680
  11,399
  13,305
  15,380
  17,623
  20,030
  22,596
  25,320
  28,196
  31,221
  34,394
  37,714
  41,180
  44,793
  48,555
  52,467
  56,535
  60,763
  65,156
  69,721
  74,465
Operating income, $m
  183
  409
  720
  1,121
  1,625
  2,242
  2,984
  3,858
  4,872
  6,028
  7,331
  8,794
  10,388
  12,127
  14,007
  16,026
  18,179
  20,465
  22,879
  25,420
  28,085
  30,875
  33,788
  36,824
  39,986
  43,276
  46,697
  50,252
  53,947
  57,786
  61,778
EBITDA, $m
  220
  446
  767
  1,180
  1,699
  2,335
  3,099
  3,999
  5,042
  6,233
  7,574
  9,066
  10,708
  12,498
  14,433
  16,512
  18,729
  21,082
  23,567
  26,183
  28,928
  31,799
  34,798
  37,924
  41,180
  44,567
  48,088
  51,748
  55,552
  59,505
  63,614
Interest expense (income), $m
  15
  119
  164
  257
  375
  523
  704
  921
  1,176
  1,471
  1,808
  2,187
  2,608
  3,071
  3,576
  4,122
  4,707
  5,332
  5,995
  6,695
  7,432
  8,205
  9,013
  9,858
  10,738
  11,654
  12,607
  13,598
  14,629
  15,699
  16,811
Earnings before tax, $m
  298
  290
  556
  864
  1,249
  1,719
  2,280
  2,937
  3,696
  4,557
  5,522
  6,607
  7,780
  9,056
  10,431
  11,904
  13,472
  15,132
  16,884
  18,725
  20,654
  22,670
  24,774
  26,967
  29,249
  31,622
  34,089
  36,653
  39,318
  42,087
  44,966
Tax expense, $m
  11
  78
  150
  233
  337
  464
  616
  793
  998
  1,230
  1,491
  1,784
  2,101
  2,445
  2,816
  3,214
  3,637
  4,086
  4,559
  5,056
  5,576
  6,121
  6,689
  7,281
  7,897
  8,538
  9,204
  9,896
  10,616
  11,364
  12,141
Net income, $m
  112
  212
  406
  631
  912
  1,255
  1,664
  2,144
  2,698
  3,326
  4,031
  4,823
  5,680
  6,611
  7,615
  8,690
  9,834
  11,047
  12,325
  13,669
  15,077
  16,549
  18,085
  19,686
  21,352
  23,084
  24,885
  26,757
  28,702
  30,724
  32,825

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  798
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,830
  7,270
  10,204
  13,963
  18,661
  24,406
  31,290
  39,390
  48,763
  59,451
  71,475
  84,844
  99,549
  115,576
  132,901
  151,494
  171,327
  192,370
  214,597
  237,985
  262,519
  288,188
  314,989
  342,929
  372,021
  402,284
  433,748
  466,449
  500,431
  535,745
  572,450
Adjusted assets (=assets-cash), $m
  5,032
  7,270
  10,204
  13,963
  18,661
  24,406
  31,290
  39,390
  48,763
  59,451
  71,475
  84,844
  99,549
  115,576
  132,901
  151,494
  171,327
  192,370
  214,597
  237,985
  262,519
  288,188
  314,989
  342,929
  372,021
  402,284
  433,748
  466,449
  500,431
  535,745
  572,450
Revenue / Adjusted assets
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
Average production assets, $m
  111
  161
  226
  309
  413
  540
  693
  872
  1,079
  1,316
  1,582
  1,878
  2,203
  2,558
  2,942
  3,353
  3,792
  4,258
  4,750
  5,268
  5,811
  6,379
  6,972
  7,590
  8,234
  8,904
  9,601
  10,324
  11,077
  11,858
  12,671
Working capital, $m
  0
  -1,152
  -1,617
  -2,213
  -2,958
  -3,869
  -4,960
  -6,244
  -7,729
  -9,423
  -11,329
  -13,448
  -15,779
  -18,320
  -21,066
  -24,013
  -27,157
  -30,492
  -34,015
  -37,723
  -41,611
  -45,680
  -49,928
  -54,357
  -58,968
  -63,765
  -68,752
  -73,936
  -79,322
  -84,920
  -90,738
Total debt, $m
  3,392
  4,697
  7,338
  10,721
  14,949
  20,120
  26,315
  33,605
  42,041
  51,660
  62,482
  74,513
  87,748
  102,173
  117,765
  134,499
  152,348
  171,287
  191,291
  212,341
  234,421
  257,523
  281,644
  306,791
  332,973
  360,209
  388,527
  417,958
  448,542
  480,325
  513,359
Total liabilities, $m
  5,238
  6,543
  9,184
  12,567
  16,795
  21,966
  28,161
  35,451
  43,887
  53,506
  64,328
  76,359
  89,594
  104,019
  119,611
  136,345
  154,194
  173,133
  193,137
  214,187
  236,267
  259,369
  283,490
  308,637
  334,819
  362,055
  390,373
  419,804
  450,388
  482,171
  515,205
Total equity, $m
  592
  727
  1,020
  1,396
  1,866
  2,441
  3,129
  3,939
  4,876
  5,945
  7,148
  8,484
  9,955
  11,558
  13,290
  15,149
  17,133
  19,237
  21,460
  23,799
  26,252
  28,819
  31,499
  34,293
  37,202
  40,228
  43,375
  46,645
  50,043
  53,575
  57,245
Total liabilities and equity, $m
  5,830
  7,270
  10,204
  13,963
  18,661
  24,407
  31,290
  39,390
  48,763
  59,451
  71,476
  84,843
  99,549
  115,577
  132,901
  151,494
  171,327
  192,370
  214,597
  237,986
  262,519
  288,188
  314,989
  342,930
  372,021
  402,283
  433,748
  466,449
  500,431
  535,746
  572,450
Debt-to-equity ratio
  5.730
  6.460
  7.190
  7.680
  8.010
  8.240
  8.410
  8.530
  8.620
  8.690
  8.740
  8.780
  8.810
  8.840
  8.860
  8.880
  8.890
  8.900
  8.910
  8.920
  8.930
  8.940
  8.940
  8.950
  8.950
  8.950
  8.960
  8.960
  8.960
  8.970
  8.970
Adjusted equity ratio
  -0.041
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  112
  212
  406
  631
  912
  1,255
  1,664
  2,144
  2,698
  3,326
  4,031
  4,823
  5,680
  6,611
  7,615
  8,690
  9,834
  11,047
  12,325
  13,669
  15,077
  16,549
  18,085
  19,686
  21,352
  23,084
  24,885
  26,757
  28,702
  30,724
  32,825
Depreciation, amort., depletion, $m
  37
  38
  47
  59
  74
  93
  115
  141
  171
  205
  244
  272
  319
  371
  426
  486
  550
  617
  688
  763
  842
  924
  1,010
  1,100
  1,193
  1,290
  1,391
  1,496
  1,605
  1,719
  1,836
Funds from operations, $m
  -1,530
  249
  453
  690
  986
  1,348
  1,779
  2,285
  2,869
  3,532
  4,275
  5,095
  5,999
  6,982
  8,041
  9,176
  10,384
  11,664
  13,014
  14,432
  15,919
  17,474
  19,096
  20,786
  22,545
  24,375
  26,277
  28,253
  30,307
  32,442
  34,662
Change in working capital, $m
  -904
  -354
  -465
  -596
  -745
  -911
  -1,091
  -1,284
  -1,486
  -1,694
  -1,906
  -2,119
  -2,331
  -2,540
  -2,746
  -2,947
  -3,144
  -3,335
  -3,523
  -3,707
  -3,889
  -4,069
  -4,248
  -4,429
  -4,611
  -4,797
  -4,987
  -5,183
  -5,386
  -5,598
  -5,818
Cash from operations, $m
  -626
  603
  918
  1,286
  1,731
  2,258
  2,870
  3,569
  4,354
  5,226
  6,181
  7,214
  8,330
  9,522
  10,787
  12,123
  13,528
  14,999
  16,537
  18,140
  19,808
  21,542
  23,344
  25,215
  27,156
  29,172
  31,264
  33,437
  35,694
  38,040
  40,480
Maintenance CAPEX, $m
  0
  -16
  -23
  -33
  -45
  -60
  -78
  -100
  -126
  -156
  -191
  -229
  -272
  -319
  -371
  -426
  -486
  -550
  -617
  -688
  -763
  -842
  -924
  -1,010
  -1,100
  -1,193
  -1,290
  -1,391
  -1,496
  -1,605
  -1,719
New CAPEX, $m
  -12
  -50
  -65
  -83
  -104
  -127
  -152
  -179
  -207
  -237
  -266
  -296
  -325
  -355
  -383
  -412
  -439
  -466
  -492
  -518
  -543
  -568
  -593
  -618
  -644
  -670
  -696
  -724
  -752
  -782
  -812
Cash from investing activities, $m
  -12
  -66
  -88
  -116
  -149
  -187
  -230
  -279
  -333
  -393
  -457
  -525
  -597
  -674
  -754
  -838
  -925
  -1,016
  -1,109
  -1,206
  -1,306
  -1,410
  -1,517
  -1,628
  -1,744
  -1,863
  -1,986
  -2,115
  -2,248
  -2,387
  -2,531
Free cash flow, $m
  -638
  537
  830
  1,170
  1,582
  2,071
  2,640
  3,289
  4,021
  4,833
  5,724
  6,689
  7,732
  8,848
  10,033
  11,285
  12,603
  13,984
  15,428
  16,934
  18,502
  20,132
  21,826
  23,586
  25,412
  27,308
  29,277
  31,321
  33,445
  35,653
  37,949
Issuance/(repayment) of debt, $m
  821
  1,305
  2,641
  3,383
  4,229
  5,170
  6,196
  7,290
  8,436
  9,619
  10,822
  12,031
  13,235
  14,424
  15,592
  16,734
  17,850
  18,939
  20,004
  21,049
  22,080
  23,102
  24,122
  25,146
  26,182
  27,237
  28,318
  29,431
  30,584
  31,783
  33,034
Issuance/(repurchase) of shares, $m
  299
  721
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,094
  2,026
  2,641
  3,383
  4,229
  5,170
  6,196
  7,290
  8,436
  9,619
  10,822
  12,031
  13,235
  14,424
  15,592
  16,734
  17,850
  18,939
  20,004
  21,049
  22,080
  23,102
  24,122
  25,146
  26,182
  27,237
  28,318
  29,431
  30,584
  31,783
  33,034
Total cash flow (excl. dividends), $m
  434
  2,563
  3,471
  4,553
  5,811
  7,242
  8,835
  10,579
  12,457
  14,452
  16,546
  18,720
  20,967
  23,272
  25,625
  28,019
  30,452
  32,923
  35,432
  37,983
  40,582
  43,234
  45,948
  48,732
  51,594
  54,545
  57,595
  60,752
  64,029
  67,436
  70,983
Retained Cash Flow (-), $m
  -322
  -933
  -293
  -376
  -470
  -574
  -688
  -810
  -937
  -1,069
  -1,202
  -1,337
  -1,471
  -1,603
  -1,732
  -1,859
  -1,983
  -2,104
  -2,223
  -2,339
  -2,453
  -2,567
  -2,680
  -2,794
  -2,909
  -3,026
  -3,146
  -3,270
  -3,398
  -3,531
  -3,670
Prev. year cash balance distribution, $m
 
  798
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,428
  3,177
  4,177
  5,341
  6,667
  8,147
  9,769
  11,519
  13,383
  15,344
  17,383
  19,497
  21,669
  23,892
  26,160
  28,469
  30,818
  33,209
  35,644
  38,128
  40,667
  43,268
  45,938
  48,685
  51,519
  54,448
  57,482
  60,631
  63,904
  67,312
Discount rate, %
 
  10.30
  10.82
  11.36
  11.92
  12.52
  13.15
  13.80
  14.49
  15.22
  15.98
  16.78
  17.62
  18.50
  19.42
  20.39
  21.41
  22.48
  23.61
  24.79
  26.03
  27.33
  28.70
  30.13
  31.64
  33.22
  34.88
  36.62
  38.45
  40.38
  42.40
PV of cash for distribution, $m
 
  2,201
  2,588
  3,025
  3,404
  3,696
  3,883
  3,952
  3,901
  3,740
  3,485
  3,156
  2,782
  2,386
  1,991
  1,617
  1,277
  981
  732
  531
  373
  255
  168
  108
  66
  40
  23
  13
  7
  3
  2
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Ares Management, L.P. is an alternative asset manager. The Company offers its investors a range of investment strategies. It operates through three segments: Credit Group, Private Equity Group and Real Estate Group. The Credit Group segment manages credit strategies across the non-investment grade credit universe in the United States and Europe. It offers a range of credit strategies across the liquid and illiquid spectrum, including syndicated loans, high yield bonds, credit opportunities, structured credit investments and the United States and European direct lending. The Credit Group provides solutions for traditional fixed income investors. The Private Equity Group segment categorizes its investment strategies as corporate private equity, the United States power and energy infrastructure and special situations. The Real Estate Group segment manages public and private equity and debt strategies. The Real Estate Group manages both a value-add strategy and an opportunistic strategy.

FINANCIAL RATIOS  of  Ares Management (ARES)

Valuation Ratios
P/E Ratio 13.3
Price to Sales 1.2
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow -2.4
Price to Free Cash Flow -2.3
Growth Rates
Sales Growth Rate 47.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.1%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 573%
Total Debt to Equity 573%
Interest Coverage 21
Management Effectiveness
Return On Assets 2.5%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 3.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 26%
Return On Equity - 3 Yr. Avg. 19.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 29.2%
EBITDA Margin - 3 Yr. Avg. 62.6%
Operating Margin 15.3%
Oper. Margin - 3 Yr. Avg. 17.7%
Pre-Tax Margin 24.9%
Pre-Tax Margin - 3 Yr. Avg. 42.3%
Net Profit Margin 9.3%
Net Profit Margin - 3 Yr. Avg. 29%
Effective Tax Rate 3.7%
Eff/ Tax Rate - 3 Yr. Avg. 9.7%
Payout Ratio 190.2%

ARES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ARES stock intrinsic value calculation we used $1199 million for the last fiscal year's total revenue generated by Ares Management. The default revenue input number comes from 2016 income statement of Ares Management. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ARES stock valuation model: a) initial revenue growth rate of 44.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 10.3%, whose default value for ARES is calculated based on our internal credit rating of Ares Management, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Ares Management.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ARES stock the variable cost ratio is equal to 55.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $362 million in the base year in the intrinsic value calculation for ARES stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Ares Management.

Corporate tax rate of 27% is the nominal tax rate for Ares Management. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ARES stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ARES are equal to 9.3%.

Life of production assets of 6.9 years is the average useful life of capital assets used in Ares Management operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ARES is equal to -66.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $592 million for Ares Management - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 212.399 million for Ares Management is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Ares Management at the current share price and the inputted number of shares is $3.9 billion.

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COMPANY NEWS

▶ How Apollos Valuation Stacks Up   [Nov-23-17 09:01AM  Market Realist]
▶ [$$] Ares Management Profit Growth Slows   [Nov-03-17 04:08PM  The Wall Street Journal]
▶ Ares Management beats 3Q profit forecasts   [07:35AM  Associated Press]
▶ How Wall Street Analysts Rated KKR after Its 3Q17 Results   [Nov-02-17 10:30AM  Market Realist]
▶ Ares CEO Ressler on Investment Opportunities, U.S. Banks   [Oct-24-17 01:24PM  Bloomberg Video]
▶ Alternative Asset Managers All Over the Place in Q3   [Oct-06-17 04:05PM  Barrons.com]
▶ Should You Sell Ares Management LP (ARES) At This PE Ratio?   [Oct-04-17 03:36PM  Simply Wall St.]
▶ Ares CEO Tony Ressler on Trump, Markets, Investing   [Sep-20-17 12:47PM  Bloomberg Video]
▶ How Wall Street Analysts View Alternative Asset Managers   [Aug-17-17 10:37AM  Market Realist]
▶ Ares Management meets 2Q profit forecasts   [Aug-04-17 09:42PM  Associated Press]
▶ [$$] LightBay, Founded by Former Ares Executives, Seeks $450 Million   [Aug-03-17 01:08PM  The Wall Street Journal]
▶ Ares Management Announces Pricing of $1.1 Billion CLO   [Jul-17-17 06:30AM  Business Wire]
▶ Apollos Credit Segment to Benefit from Mid-Cap Acquisition   [Jun-29-17 02:05PM  Market Realist]
▶ 3 Stocks With Clayton Williams-Like Return Potential   [May-27-17 09:10AM  Motley Fool]
▶ Ares Management reports 1Q loss   [09:48AM  Associated Press]
▶ [$$] Boart Longyear Seeks U.S. Bankruptcy Protection   [Apr-28-17 05:04PM  The Wall Street Journal]
Financial statements of ARES
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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