KKR (NYSE:KKR) is making headlines with two significant moves: a new fundraising push for its fifth Asia-focused private equity fund and a fresh agreement with PayPal to buy up to €65 billion in European buy now, pay later loan receivables.
See our latest analysis for KKR.
Momentum around KKR has been mixed lately, with shares recently touching $118.67 after a string of notable developments, including a major new Asia fund initiative and a sweeping expansion of its credit footprint in Europe. Still, this year’s share price return has slipped, and the total shareholder return over the past twelve months sits at -24.8%. At the same time, KKR’s five-year total return remains a robust 220%, which shows that long-term investors have been well rewarded despite current volatility.
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With so much capital flowing into new funds and fresh deals, is KKR’s current price an undervaluation of its potential? Or is the market already factoring in the next wave of global growth?
With KKR’s last closing price at $118.67 and the narrative marking fair value at $157.14, there is a significant gap that calls attention to the underlying story powering this outlook.
Strong and accelerating fundraising momentum across asset classes, especially with institutional investors and the fast-growing private wealth and retail segment, are expanding fee-paying AUM and supporting double-digit management fee growth. There is further upside from new distribution initiatives such as the partnership with Capital Group and insurance third-party capital. This is likely to positively impact future revenue and management fees.
Read the complete narrative.
Beneath the surface, this narrative hints at blockbuster earnings growth and profit improvements that defy the recent dip. Curious what blockbuster assumption underpins that bold fair value? See what number justifies the gap.
Result: Fair Value of $157.14 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, rising competition and potential asset quality issues in private credit could quickly challenge the bullish outlook. This may make future earnings less predictable.
Find out about the key risks to this KKR narrative.
Looking from a different perspective, KKR’s price-to-earnings ratio stands at 46.6x, which is substantially higher than the US Capital Markets industry average of 23.6x, the peer average of 33.8x, and even the fair ratio of 27.6x. This elevated multiple means investors are paying a premium, adding a layer of risk if earnings growth does not meet high expectations. Could this rich valuation signal vulnerability if momentum wanes?