Ares Management (NYSE:ARES) and Houlihan Lokey (NYSE:HLI) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, earnings, institutional ownership, profitability and dividends.
Risk & Volatility
Ares Management has a beta of 1.18, indicating that its share price is 18% more volatile than the S&P 500. Comparatively, Houlihan Lokey has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500.
Profitability
This table compares Ares Management and Houlihan Lokey's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Ares Management | 7.22% | 16.07% | 2.09% |
Houlihan Lokey | 18.06% | 19.18% | 12.48% |
Earnings & Valuation
This table compares Ares Management and Houlihan Lokey's top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
---|
Ares Management | $1.77 billion | 7.61 | $148.88 million | $1.67 | 31.11 |
Houlihan Lokey | $1.16 billion | 3.92 | $183.79 million | $3.20 | 20.59 |
Houlihan Lokey has lower revenue, but higher earnings than Ares Management. Houlihan Lokey is trading at a lower price-to-earnings ratio than Ares Management, indicating that it is currently the more affordable of the two stocks.
Analyst Ratings
This is a breakdown of recent ratings and target prices for Ares Management and Houlihan Lokey, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Ares Management | 0 | 3 | 6 | 0 | 2.67 |
Houlihan Lokey | 2 | 3 | 0 | 0 | 1.60 |
Ares Management currently has a consensus target price of $48.8571, suggesting a potential downside of 6.10%. Houlihan Lokey has a consensus target price of $64.25, suggesting a potential downside of 2.50%. Given Houlihan Lokey's higher probable upside, analysts clearly believe Houlihan Lokey is more favorable than Ares Management.
Institutional and Insider Ownership
42.4% of Ares Management shares are owned by institutional investors. Comparatively, 72.5% of Houlihan Lokey shares are owned by institutional investors. 59.7% of Ares Management shares are owned by company insiders. Comparatively, 27.0% of Houlihan Lokey shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
Dividends
Ares Management pays an annual dividend of $1.60 per share and has a dividend yield of 3.1%. Houlihan Lokey pays an annual dividend of $1.32 per share and has a dividend yield of 2.0%. Ares Management pays out 95.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Houlihan Lokey pays out 41.3% of its earnings in the form of a dividend. Ares Management has raised its dividend for 1 consecutive years and Houlihan Lokey has raised its dividend for 3 consecutive years.
Summary
Houlihan Lokey beats Ares Management on 9 of the 17 factors compared between the two stocks.