Is Apollo Global Management Attractively Priced After Its Recent Private Credit Expansion?
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Wondering if Apollo Global Management is a bargain or a bubble at its current price? This article will walk you through what the numbers are really saying about the stock.
Even though the shares are down 11.3% year to date and 15.4% over the last year, they have climbed 2.3% in the past week and 12.7% over the past month, against a backdrop of large 3 year and 5 year gains of 147.1% and 243.9%.
Recent headlines have highlighted Apollo’s continued push into private credit and alternative lending, as investors look for yield outside traditional bonds. At the same time, growing institutional demand for alternative assets has kept the spotlight on platforms like Apollo and influenced how the market prices in its long term growth story.
Right now, Apollo scores a 3 out of 6 on our valuation checks, suggesting it looks undervalued on some metrics but not all. In this article we unpack the main valuation approaches and, by the end, explore a more complete way to judge what the stock is really worth.
The Excess Returns model looks at how effectively Apollo Global Management turns shareholder equity into profits above its cost of capital, then projects how long those value creating returns can continue.
For Apollo, the starting point is its Book Value of $37.46 per share and an Average Return on Equity of 18.88%. That level of profitability feeds into a Stable EPS estimate of $10.33 per share, based on forecasts from 5 analysts. Against a Cost of Equity of $4.11 per share, the model estimates an Excess Return of $6.22 per share. In this framework, Apollo is expected to generate earnings above what investors require for the risk they take.
Over time, as Book Value is projected to grow toward a Stable Book Value of $54.72 per share, those excess returns compound. The model converts this into an intrinsic value per share of about $201.18. With the Excess Returns valuation implying the stock is 26.9% undervalued, the current market price is presented as sitting below what these profitability and growth assumptions suggest.
For profitable companies like Apollo Global Management, the price to earnings, or PE, ratio is a practical way to gauge how much investors are willing to pay today for each dollar of current earnings. In general, faster growth and lower risk justify a higher PE, while slower growth or higher uncertainty usually mean the stock should trade on a lower multiple.
Apollo currently trades on a PE of 21.02x, which is meaningfully above the Diversified Financial industry average of about 13.57x and close to the broader peer average of 13.67x. At first glance, that premium might look rich. However, Simply Wall St’s Fair Ratio framework estimates that, considering Apollo’s earnings growth profile, profitability, industry positioning, size and risk factors, a more appropriate PE for the stock is around 23.44x. This Fair Ratio is more informative than a simple industry or peer comparison because it adjusts for company specific fundamentals rather than assuming one size fits all.
Comparing the current 21.02x PE to the Fair Ratio of 23.44x suggests Apollo is trading at a discount to what its fundamentals would typically warrant.
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives.
A Narrative is your own clear story about a company that sits behind the numbers, tying together what you believe about its future revenue, earnings and margins with the fair value you think is reasonable today.
On Simply Wall St’s Community page, used by millions of investors, Narratives make this process easy by linking a company’s business story to a financial forecast and then to a fair value estimate that you can compare directly with the current share price to decide whether to buy, hold or sell.
Because Narratives are updated dynamically when fresh information arrives, such as news or earnings releases, your fair value view adjusts as the story changes rather than staying locked to a static model.
For Apollo Global Management, one investor might build a bullish Narrative around S&P 500 inclusion, industrial and retirement growth and arrive at a fair value near the high analyst target of about $178 per share. Meanwhile, a more cautious investor, focused on regulatory and competitive risks, might land closer to the low target near $118 per share.
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
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