Ares Management CorporationARESNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $211.21 per share(market-calibrated)

+86.3%

Upside to Fair Value

Current

$113.37

Pure Model

$221.07

Fair Value

$211.21

Bull Case

$305.62

Bear Case

$150.39

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $221.07.

What's Driving This Ratingfor ARES

✓

CapEx already efficient

CapEx at 0.91% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 43.00% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects -9.54% revenue growth, fading to 2.50% by Year 10. Revenue reaches $13.7B (vs $6.5B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 82.93% indicates efficient cash generation. FCF reaches $5.2B by Year 10 (37.83% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.52

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)11.36%

Cost of Debt

Pre-tax Cost of Debt4.54%

Tax Rate15.43%

After-tax Cost of Debt3.84%

Equity Weight (E/V)62.30%

Debt Weight (D/V)37.70%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (62.30% × 11.36%) + (37.70% × 3.84%)

= 8.52%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$5.9B	$8.3B	$12.1B	$12.7B	$13.7B
EBIT	$2.5B	$3.6B	$5.2B	$5.5B	$5.9B
Tax	$388M	$548M	$803M	$844M	$908M
NOPAT	$2.1B	$3.0B	$4.4B	$4.6B	$5.0B
+ Depreciation	$153M	$216M	$316M	$332M	$358M
- Capex	$53M	$75M	$110M	$116M	$124M
- Δ NWC	-$62M	$140M	$30M	$31M	$33M
Free Cash Flow	$2.3B	$3.0B	$4.6B	$4.8B	$5.2B
Discount Factor	0.921	0.782	0.664	0.564	0.441
Present Value	$2.1B	$2.4B	$3.0B	$2.7B	$2.3B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$5.2B

Terminal Growth Rate2.50%

WACC8.52%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$88.1B

PV of Terminal Value$38.9B

Exit Multiple Method

Year 10 EBITDA$6.2B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$75.0B

PV of Terminal Value$33.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$25.5B

PV of Terminal Value$38.9B

Enterprise Value$64.4B

(-) Net Debt$13.4B

Equity Value$51.0B

Shares Outstanding217M

Price per Share$234.47

Exit Multiple Method

PV of Projected FCFs$25.5B

PV of Terminal Value$33.1B

Enterprise Value$58.6B

(-) Net Debt$13.4B

Equity Value$45.1B

Shares Outstanding217M

Price per Share$207.68

Pure Model Fair Value

$221.07

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
6.52%	$288.09	$302.94	$321.48	$345.28	$376.95
7.52%	$242.42	$251.74	$262.92	$276.57	$293.62
8.52%	$207.58	$213.81	$221.07	$229.65	$239.94
9.52%	$179.81	$184.16	$189.13	$194.87	$201.55
10.52%	$156.96	$160.10	$163.64	$167.66	$172.24

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$150.39

32.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.91

Base Case

$221.07

95.0% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.52

Bull Case

$305.62

169.6% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 1.30

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-9.54%

Year 3 Revenue Growth20.45%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin43.00%

Tax Rate15.43%

Historical Capex / Rev0.91%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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