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TROW vs. ARES: Which Stock Should Value Investors Buy Now?

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Investors interested in stocks from the Financial - Investment Management sector have probably already heard of T. Rowe Price (TROW - Free Report) and Ares Management (ARES - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, T. Rowe Price has a Zacks Rank of #2 (Buy), while Ares Management has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that TROW likely has seen a stronger improvement to its earnings outlook than ARES has recently. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

TROW currently has a forward P/E ratio of 16.68, while ARES has a forward P/E of 23.12. We also note that TROW has a PEG ratio of 1.80. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. ARES currently has a PEG ratio of 4.40.

Another notable valuation metric for TROW is its P/B ratio of 4.28. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ARES has a P/B of 5.65.

These are just a few of the metrics contributing to TROW's Value grade of B and ARES's Value grade of D.

TROW has seen stronger estimate revision activity and sports more attractive valuation metrics than ARES, so it seems like value investors will conclude that TROW is the superior option right now.


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T. Rowe Price Group, Inc. (TROW) - free report >>

Ares Management Corporation (ARES) - free report >>

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