Analyzing Medley Management (MDLY) and Ares Management (ARES)

Ares Management (NYSE: ARES) and Medley Management (NYSE:MDLY) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, valuation, institutional ownership, earnings, dividends, profitability and analyst recommendations.

Profitability

This table compares Ares Management and Medley Management’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ares Management 4.98% 39.54% 6.11%
Medley Management 3.14% -35.40% 14.52%

Insider and Institutional Ownership

15.6% of Ares Management shares are held by institutional investors. Comparatively, 56.9% of Medley Management shares are held by institutional investors. 5.1% of Medley Management shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Ares Management pays an annual dividend of $1.64 per share and has a dividend yield of 7.1%. Medley Management pays an annual dividend of $0.80 per share and has a dividend yield of 11.9%. Ares Management pays out 292.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Medley Management pays out 363.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings & Valuation

This table compares Ares Management and Medley Management’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ares Management $1.20 billion 1.57 $111.80 million $0.56 40.98
Medley Management $76.03 million 0.48 $990,000.00 $0.22 30.46

Ares Management has higher revenue and earnings than Medley Management. Medley Management 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 Recommendations

This is a breakdown of recent ratings for Ares Management and Medley Management, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Management 0 1 5 0 2.83
Medley Management 0 3 0 0 2.00

Ares Management presently has a consensus target price of $23.67, indicating a potential upside of 3.12%. Medley Management has a consensus target price of $9.25, indicating a potential upside of 38.06%. Given Medley Management’s higher possible upside, analysts plainly believe Medley Management is more favorable than Ares Management.

Risk & Volatility

Ares Management has a beta of 1.23, meaning that its share price is 23% more volatile than the S&P 500. Comparatively, Medley Management has a beta of 1.51, meaning that its share price is 51% more volatile than the S&P 500.

Summary

Ares Management beats Medley Management on 9 of the 16 factors compared between the two stocks.

About Ares Management

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 Medley Management

Medley Management Inc. is an asset management firm offering yield solutions to retail and institutional investors. The Company operates in the investment management segment. It is focused on credit-related investment strategies, primarily originating senior secured loans to private middle market companies in the United States. The Company generally holds these loans to maturity. Its national direct origination franchise provides capital to the middle market in the United States. The Company has over $4.8 billion of assets under management (AUM) in approximately two business development companies (BDCs), Medley Capital Corporation (MCC) and Sierra Income Corporation (SIC), as well as private investment vehicles. It has over $5 billion of AUM. The Company provides capital to over 300 companies across approximately 35 industries in North America. The Company’s long-dated private funds include MOF I, MOF II and MOF III. Its private funds are managed through partnership structures

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