Contrasting Ares Management (NYSE:ARES) & Hennessy Advisors (NASDAQ:HNNA)

Hennessy Advisors (NASDAQ:HNNA) and Ares Management (NYSE:ARES) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, dividends, profitability, earnings, analyst recommendations, institutional ownership and valuation.

Analyst Recommendations

This is a summary of recent ratings and price targets for Hennessy Advisors and Ares Management, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hennessy Advisors	0	1	0	0	2.00
Ares Management	0	5	13	1	2.79

Ares Management has a consensus target price of $166.06, suggesting a potential upside of 34.82%. Given Ares Management’s stronger consensus rating and higher probable upside, analysts plainly believe Ares Management is more favorable than Hennessy Advisors.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Hennessy Advisors	25.40%	8.58%	5.26%
Ares Management	10.54%	22.02%	5.62%

Earnings and Valuation

This table compares Hennessy Advisors and Ares Management”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hennessy Advisors	$35.54 million	2.26	$9.96 million	$1.14	8.95
Ares Management	$5.60 billion	7.24	$527.36 million	$2.15	57.29

Ares Management has higher revenue and earnings than Hennessy Advisors. Hennessy Advisors is trading at a lower price-to-earnings ratio than Ares Management, indicating that it is currently the more affordable of the two stocks.

Dividends

Hennessy Advisors pays an annual dividend of $0.60 per share and has a dividend yield of 5.9%. Ares Management pays an annual dividend of $5.40 per share and has a dividend yield of 4.4%. Hennessy Advisors pays out 52.6% of its earnings in the form of a dividend. Ares Management pays out 251.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Management has raised its dividend for 7 consecutive years. Hennessy Advisors is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

10.3% of Hennessy Advisors shares are held by institutional investors. Comparatively, 50.0% of Ares Management shares are held by institutional investors. 36.0% of Hennessy Advisors shares are held by company insiders. Comparatively, 36.9% of Ares Management shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

Hennessy Advisors has a beta of 0.59, indicating that its stock price is 41% less volatile than the S&P 500. Comparatively, Ares Management has a beta of 1.5, indicating that its stock price is 50% more volatile than the S&P 500.

Summary

Ares Management beats Hennessy Advisors on 15 of the 18 factors compared between the two stocks.

About Hennessy Advisors

Hennessy Advisors, Inc. is an employee owned investment manager. It provides its services to Hennessy Funds and investment companies. The firm launches and manages equity, fixed income, and balanced mutual funds. It invests in the public equity and fixed income markets across the globe. The firm primarily invests in growth stocks of companies. It conducts in-house research to make its investments. Hennessy Advisors, Inc. was founded in 1989 and is based in Novato, California with additional offices in Boston, Massachusetts and Chapel Hill, North Carolina.

About Ares Management

Ares Management Corporation operates as an alternative asset manager in the United States, Europe, and Asia. The company's Tradable Credit Group segment manages various types of investment funds, such as commingled and separately managed accounts for institutional investors, and publicly traded vehicles and sub-advised funds for retail investors in the tradable and non-investment grade corporate credit markets. Its Direct Lending Group segment provides financing solutions to small-to-medium sized companies. The company's Private Equity Group segment focuses on majority or shared-control investments primarily in under-capitalized companies. Its Real Estate Group segment invests in new developments and the repositioning of assets, with a focus on control or majority-control investments; and originates and invests in a range of self-originated financing opportunities for middle-market owners and operators of commercial real estate. The firm was previously known as Ares Management, L.P. Ares Management Corporation was founded in 1997 and is headquartered in Los Angeles, California with additional offices in the United States, Europe and Asia. Ares Management GP LLC is the general partner of the company.