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Apollo Global Management (APO) recently agreed for Apollo managed funds and affiliates to invest US$1.5b into Keppel Offshore Fund, a rated investment grade vehicle focused on offshore energy assets in Southeast Asia.
See our latest analysis for Apollo Global Management.
The Keppel Offshore Fund deal comes after a busy period for Apollo Global Management, with acquisitions such as Emerald Holding and Questex and fresh investor communication from Athene helping frame a mixed picture where short term share price returns have been soft but multi year total shareholder returns remain strong.
If this type of capital deployment catches your attention, it could be worth broadening your search and checking out 18 top founder-led companies
Bulls see Apollo Global Management using deals like Keppel Offshore Fund to grow fee based earnings, while bears focus on softer recent returns and revenue pressure. Which side does the current valuation lean toward?
Preferred P/E of 62x: Is it justified?
Apollo Global Management closed at $124.24, which currently corresponds to a P/E of 62x. That is high relative to both its own fair value estimate and its peers, even after a period where the share price has fallen 15.1% over the past year while the broader US market gained 15.3%.
The P/E multiple compares the current share price to earnings per share and is often used as a shorthand for how much investors are paying for each dollar of profit. For a diversified financial company like Apollo Global Management, a higher P/E can indicate that investors expect stronger earnings growth or see its fee and asset management model as particularly attractive.
Here, the signals are mixed. On one side, earnings are forecast to grow 32.3% per year and faster than the US market, and the SWS DCF model suggests Apollo Global Management is trading at a 17.3% discount to an estimated fair value of $150.25. On the other side, reported earnings over the last year declined 68.5%, net profit margins fell from 15.1% to 3.7%, and return on equity sits at a relatively low 7.7%, which can make a 62x P/E look demanding.
Compared with the US Diversified Financial industry average P/E of 15.3x and an estimated fair P/E of 26.4x from the SWS fair ratio model, Apollo Global Management screens as expensive on this metric. The current valuation stands well above both the sector norm and the level that regression based analysis suggests the market could move toward over time.
Explore the SWS fair ratio for Apollo Global Management
Result: Price-to-earnings of 62x (OVERVALUED)
However, softer recent share price returns and an annual revenue decline of 94% could challenge the case for Apollo Global Management sustaining a premium 62x P/E.
Find out about the key risks to this Apollo Global Management narrative.
Another View on Apollo Global Management's Value
The P/E story suggests Apollo Global Management looks expensive, yet our DCF model points the other way. On that measure, the stock trades about 17.3% below an estimated fair value of $150.25, which frames the current price as a potential discount rather than a premium. Which lens do you put more weight on?
Before leaning on any single approach, it is worth understanding how the cash flow assumptions work in practice. Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day ( check out Apollo Global Management for example ). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks . If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Does the mix of risks and rewards around Apollo Global Management feel clear yet, or still a bit unsettled? Take a closer look at the full balance of signals through 2 key rewards and 3 important warning signs
Looking for more investment ideas beyond Apollo Global Management?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include APO .
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
