Financial Contrast: KKR & Co. L.P. (KKR) versus Ares Management L.P. (NYSE:ARES)

Ares Management L.P. (NYSE: ARES) and KKR & Co. L.P. (NYSE:KKR) are both mid-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, dividends, risk, institutional ownership, valuation, profitability and analyst recommendations.

Analyst Recommendations

This is a summary of current ratings for Ares Management L.P. and KKR & Co. L.P., as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Management L.P. 0 1 6 0 2.86
KKR & Co. L.P. 0 3 6 0 2.67

Ares Management L.P. presently has a consensus target price of $21.83, suggesting a potential upside of 23.35%. KKR & Co. L.P. has a consensus target price of $21.33, suggesting a potential upside of 17.60%. Given Ares Management L.P.’s stronger consensus rating and higher probable upside, research analysts plainly believe Ares Management L.P. is more favorable than KKR & Co. L.P..

Profitability

This table compares Ares Management L.P. and KKR & Co. L.P.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ares Management L.P. 5.86% 40.94% 7.01%
KKR & Co. L.P. 42.48% 11.45% 4.79%

Insider and Institutional Ownership

14.4% of Ares Management L.P. shares are owned by institutional investors. Comparatively, 76.6% of KKR & Co. L.P. shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Ares Management L.P. pays an annual dividend of $1.24 per share and has a dividend yield of 7.0%. KKR & Co. L.P. pays an annual dividend of $0.68 per share and has a dividend yield of 3.7%. Ares Management L.P. pays out 169.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KKR & Co. L.P. pays out 28.2% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares Ares Management L.P. and KKR & Co. L.P.’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ares Management L.P. $1.47 billion 2.58 $260.09 million $0.73 24.25
KKR & Co. L.P. $5.31 billion 1.61 $1.13 billion $2.41 7.53

KKR & Co. L.P. has higher revenue and earnings than Ares Management L.P.. KKR & Co. L.P. 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.

Risk and Volatility

Ares Management L.P. has a beta of 1.25, indicating that its share price is 25% more volatile than the S&P 500. Comparatively, KKR & Co. L.P. has a beta of 1.53, indicating that its share price is 53% more volatile than the S&P 500.

Ares Management L.P. Company Profile

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.

KKR & Co. L.P. Company Profile

KKR & CO. L.P. (KKR) is a global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit and hedge funds. The Company’s business offers a range of investment management services to its fund investors, and provides capital markets services to its firm, its portfolio companies and third parties. The Company conducts its business with offices across the world, providing it with a global platform for sourcing transactions, raising capital and carrying out capital markets activities. The Company operates through four segments: Private Markets, Public Markets, Capital Markets and Principal Activities. It operates and reports its combined credit and hedge funds businesses through the Public Markets segment. The Capital Markets segment consists primarily of its global capital markets business. Through its Principal Activities segment, the Company manages the firm’s assets and deploys capital.

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