Ares Management (NYSE:ARES – Get Free Report) and Morgan Stanley (NYSE:MS – Get Free Report) are both large-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, valuation, dividends, earnings, risk, analyst recommendations and institutional ownership.
Insider and Institutional Ownership
50.0% of Ares Management shares are owned by institutional investors. Comparatively, 84.2% of Morgan Stanley shares are owned by institutional investors. 34.7% of Ares Management shares are owned by insiders. Comparatively, 0.2% of Morgan Stanley shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.
Dividends
Ares Management pays an annual dividend of $5.40 per share and has a dividend yield of 4.7%. Morgan Stanley pays an annual dividend of $4.60 per share and has a dividend yield of 2.5%. Ares Management pays out 247.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Morgan Stanley pays out 37.2% of its earnings in the form of a dividend. Ares Management has raised its dividend for 7 consecutive years and Morgan Stanley has raised its dividend for 12 consecutive years.
Valuation and Earnings
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Ares Management | $5.60 billion | 6.82 | $527.36 million | $2.18 | 53.07 |
| Morgan Stanley | $119.66 billion | 2.46 | $16.86 billion | $12.37 | 15.09 |
Morgan Stanley has higher revenue and earnings than Ares Management. Morgan Stanley is trading at a lower price-to-earnings ratio than Ares Management, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Ares Management has a beta of 1.53, suggesting that its share price is 53% more volatile than the S&P 500. Comparatively, Morgan Stanley has a beta of 1.22, suggesting that its share price is 22% more volatile than the S&P 500.
Analyst Recommendations
This is a summary of recent ratings and recommmendations for Ares Management and Morgan Stanley, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Ares Management | 0 | 6 | 12 | 1 | 2.74 |
| Morgan Stanley | 1 | 13 | 11 | 2 | 2.52 |
Ares Management currently has a consensus target price of $155.38, suggesting a potential upside of 34.30%. Morgan Stanley has a consensus target price of $219.43, suggesting a potential upside of 17.59%. Given Ares Management’s stronger consensus rating and higher probable upside, research analysts clearly believe Ares Management is more favorable than Morgan Stanley.
Profitability
This table compares Ares Management and Morgan Stanley’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Ares Management | 10.63% | 25.42% | 6.35% |
| Morgan Stanley | 15.65% | 19.31% | 1.33% |
Summary
Ares Management beats Morgan Stanley on 10 of the 18 factors compared between the two stocks.
About Ares Management
Ares Management Corporation operates as an alternative asset manager in the United States, Europe, and Asia. The company's Tradable Credit Group segment manages various types of investment funds, such as commingled and separately managed accounts for institutional investors, and publicly traded vehicles and sub-advised funds for retail investors in the tradable and non-investment grade corporate credit markets. Its Direct Lending Group segment provides financing solutions to small-to-medium sized companies. The company's Private Equity Group segment focuses on majority or shared-control investments primarily in under-capitalized companies. Its Real Estate Group segment invests in new developments and the repositioning of assets, with a focus on control or majority-control investments; and originates and invests in a range of self-originated financing opportunities for middle-market owners and operators of commercial real estate. The firm was previously known as Ares Management, L.P. Ares Management Corporation was founded in 1997 and is headquartered in Los Angeles, California with additional offices in the United States, Europe and Asia. Ares Management GP LLC is the general partner of the company.
About Morgan Stanley
Morgan Stanley, a financial holding company, provides various financial products and services to corporations, governments, financial institutions, and individuals in the Americas, Europe, the Middle East, Africa, and Asia. It operates through Institutional Securities, Wealth Management, and Investment Management segments. The Institutional Securities segment offers capital raising and financial advisory services, including services related to the underwriting of debt, equity, and other securities, as well as advice on mergers and acquisitions, restructurings, real estate, and project finance. This segment also provides equity and fixed income products comprising sales, financing, prime brokerage, and market-making services; foreign exchange and commodities; corporate and commercial real estate loans, commercial mortgage and secured lending facilities, and financing for sales and trading customers, and asset-backed and mortgage lending; and wealth management services, investment, and research services. The Wealth Management segment offers financial advisor-led brokerage, custody, administrative, and investment advisory services; self-directed brokerage services; financial and wealth planning services; workplace services, including stock plan administration; annuity and insurance products; securities-based lending, residential real estate loans, and other lending products; banking; and retirement plan services to individual investors and small to medium-sized businesses and institutions. The Investment Management segment provides equity, fixed income, alternatives and solutions, and liquidity and overlay services to benefit/defined contribution plans, foundations, endowments, government entities, sovereign wealth funds, insurance companies, third-party fund sponsors, corporations, and individuals through institutional and intermediary channels. The company was founded in 1924 and is headquartered in New York, New York.
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