Ares Management is an IBD 50 Growth Stock To Watch as shares of the fast-expanding asset manager have climbed to within 15% of a buy point in a new base. Earnings are due in a week.
The Los Angeles-based company provides investment management and consultancy services to institutions and high-net-worth people. The company's business has been expanding rapidly, with assets under management mushrooming 55% in 2021 along with strong earnings growth, according to Ares' annual letter for 2021.
Ares has traced a long, somewhat sloppy consolidation on its stock chart, according to MarketSmith chart analysis. The stock peaked at 90.08 on Nov. 18. Ares stock then descended to a low of 65.61 on March 8. On the way, it zigzagged below its 50-day and 200-day moving averages.
By March 17, this growth stock to watch was back above both moving averages and soon had clear skies above all the way to its old all-time high. But April 4 brought the onset of another pullback to the 50-day and 200-day lines. In a bullish sign, both of those lines are trending higher. The pullback of the past couple of weeks created a handle that provides an 85.58 buy point.
The stock took a 4% dive Thursday right to its 50-day line, where it found support.
Ares has three main investment groups. The credit group, which accounts for 60% of Ares' revenue, specializes in investment strategies involving syndicated loans, high-yield bonds, multiasset credit, alternative credit investments, and U.S. and European direct lending.
The company's private equity group generates 18% of revenue, while real estate brings in 14% and other areas the remaining 8%.
This growth stock to watch has been powered by strong profit growth. Earnings have risen an average 69.1% in the past three quarters, according to Stock Checkup, with Q4 earnings per share jumping 43%.
Annuals earnings have climbed at a 83% clip in the past three years.
The company is due to report first-quarter earnings on April 28. The consensus estimate for Q1 EPS by analysts tracked by FactSet is 68 cents, up 48% from a year earlier. For the full year, Wall Street sees earnings per share rising 28% to $3.30, from $2.57.
While earnings growth remains strong, the recent slower pace of quarterly and annual growth has weighed a tad on Ares' Earnings Per Share Rating, though it still remains an attractive 88 out of 99.
Growth Stock To Watch: IBD Ratings
Ares stock's action has earned it a Relative Strength Rating of 91. It rose 72% last year, far outperforming the S&P 500's 27% gain.
Combining Ares' RS, EPS and three other ratings gives the asset manager a Composite Rating of 95. It also ranks No. 1 among its peers in the investment management industry group.
