Ares Management Corporation (ARES) vs Morgan Stanley (MS): Which Is the Better Buy in 2026?
As of 2026-08-03, ARES is overvalued at $128, with a DCF intrinsic value of $72 and a margin of safety of -77%. MS is undervalued at $210, with an intrinsic value of $269 and a margin of safety of 22%. Of the two, MS has the wider margin of safety.
Rewards
- ★Trailing P/E of 59.3x is 23% below the historical average of 77.2x — potentially undervalued relative to its own history.
- ★Gross margin of 87.6% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Morgan Stanley scores 80/100 on the Economic Moat Score (Wide Moat), with revenue predictability as the strongest competitive dimension.
- ★Each dollar of retained earnings has created $3.56 of earning power — management is an exceptional capital allocator.
Risks
- ⚠Share count has increased by 25% over the past 4 years, diluting existing shareholders.
- ⚠High leverage (1.52x net debt/equity) combined with thin interest coverage (-1.0x) poses financial risk.
- ⚠Net debt/EBITDA of 9.5x indicates heavy leverage — it would take over 4 years of EBITDA to pay off net debt.
- ⚠Altman Z-Score of 0.29 places the company in the distress zone — financial patterns resemble those of companies that experienced bankruptcy.
- ⚠Insiders have sold $5.4M worth of stock in the past 3 months — significant insider liquidation.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →Requires positive FCF to compute implied growth rate.
Requires positive FCF to compute implied growth rate.
Economic Moat Score
Learn more →Narrow moat with reinvestment efficiency as the key competitive advantage. Improving roic consistency would strengthen the moat.
Wide moat driven primarily by revenue predictability. Margin Stability is the area most vulnerable to competitive pressure.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is pessimistic — investigate whether fears are temporary or structural"
"Market is pricing this stock without strong emotion in either direction"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: ARES vs MS
Is Ares Management Corporation or Morgan Stanley more undervalued in 2026?▼
Based on our discounted cash flow model, MS trades at a 21.9% margin of safety (intrinsic value $269 vs. price $210), compared to ARES's -77.4% margin of safety (intrinsic $72 vs. $128).
Which stock has a wider economic moat, Ares Management Corporation or Morgan Stanley?▼
MS scores 80/100 (Wide moat), while ARES scores 47/100 (Narrow moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is Morgan Stanley in financial distress?▼
MS's Altman Z-Score of 0.3 places it in the Distress zone, signaling elevated bankruptcy risk. ARES scores 1.4 (Distress zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which stock has higher return on invested capital, Ares Management Corporation or Morgan Stanley?▼
ARES earns 4.5% ROIC versus MS's 3.7%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.
Which dividend is safer, Ares Management Corporation's or Morgan Stanley's?▼
MS's dividend earns a safety score of 79/100 (Safe), compared to ARES's 54/100 (Borderline). MS has raised its dividend for 3 consecutive years.