Ares Management L.P. (NYSE: ARES) and Virtus Investment Partners (NASDAQ:VRTS) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, risk, dividends, earnings, analyst recommendations, institutional ownership and profitabiliy.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Ares Management L.P. and Virtus Investment Partners, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Management L.P. 0 2 6 0 2.75
Virtus Investment Partners 1 3 0 0 1.75

Ares Management L.P. presently has a consensus price target of $20.86, suggesting a potential upside of 12.44%. Virtus Investment Partners has a consensus price target of $110.00, suggesting a potential downside of 5.05%. Given Ares Management L.P.’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Ares Management L.P. is more favorable than Virtus Investment Partners.

Dividends

Ares Management L.P. pays an annual dividend of $0.52 per share and has a dividend yield of 2.8%. Virtus Investment Partners pays an annual dividend of $1.80 per share and has a dividend yield of 1.6%. Ares Management L.P. pays out 78.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Virtus Investment Partners pays out 27.9% of its earnings in the form of a dividend.

Insider and Institutional Ownership

14.6% of Ares Management L.P. shares are owned by institutional investors. Comparatively, 98.5% of Virtus Investment Partners shares are owned by institutional investors. 4.3% of Virtus Investment Partners shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

Ares Management L.P. has a beta of 1.24, meaning that its stock price is 24% more volatile than the S&P 500. Comparatively, Virtus Investment Partners has a beta of 1.71, meaning that its stock price is 71% more volatile than the S&P 500.

Profitability

This table compares Ares Management L.P. and Virtus Investment Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ares Management L.P. 5.65% 35.09% 6.51%
Virtus Investment Partners 15.27% 10.71% 4.86%

Earnings & Valuation

This table compares Ares Management L.P. and Virtus Investment Partners’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ares Management L.P. $1.30 billion 3.05 $241.00 million $0.66 28.11
Virtus Investment Partners $322.04 million 2.51 $62.46 million $6.45 17.96

Ares Management L.P. has higher revenue and earnings than Virtus Investment Partners. Virtus Investment Partners is trading at a lower price-to-earnings ratio than Ares Management L.P., indicating that it is currently the more affordable of the two stocks.

Summary

Ares Management L.P. beats Virtus Investment Partners on 9 of the 16 factors compared between the two stocks.

About Ares Management L.P.

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.

About Virtus Investment Partners

Virtus Investment Partners, Inc. (Virtus) is a provider of investment management and related services to individuals and institutions. The Company provides its products in various forms and through multiple distribution channels. Its retail products include open-end mutual funds, closed-end funds, exchange traded funds, variable insurance funds, undertakings for collective investments in transferable securities (UCITS) and separately managed accounts. Its open-end mutual funds are distributed through intermediaries. Its closed-end funds trade on the New York Stock Exchange. Its variable insurance funds are available as investment options in variable annuities and life insurance products distributed by life insurance companies. Separately managed accounts consists of intermediary programs, sponsored and distributed by unaffiliated brokerage firms, and private client accounts, which are offered to the high net-worth clients of its affiliated managers.

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