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Is Now The Time To Put Ares Management (NYSE:ARES) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Ares Management (NYSE:ARES), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Ares Management with the means to add long-term value to shareholders.

Check out our latest analysis for Ares Management

Ares Management's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Ares Management has achieved impressive annual EPS growth of 38%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Ares Management shareholders can take confidence from the fact that EBIT margins are up from 23% to 25%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Ares Management?

Are Ares Management Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$41b company like Ares Management. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$125m. While that is a lot of skin in the game, we note this holding only totals to 0.3% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.

Should You Add Ares Management To Your Watchlist?

Ares Management's earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, Ares Management is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Before you take the next step you should know about the 5 warning signs for Ares Management (2 are significant!) that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.