Can Carlyle Recover from Its Discounted Valuation?
Carlyle Group’s (CG) one-year forward PE (price-to-earnings) ratio stands at 7.58x, as compared to the peer average of 9.74x. Carlyle is now trading at a discount to its peers due to losses realized in the company’s Hedge Fund Solutions and GMS (Global Market Strategies) segments. Lower-than-expected performances in real estate credit and opportunistic credit have driven this discount in valuations.
CG is expected to recover in coming quarters, however, mainly due to its expected improved performance in its Private Equity segment, backed by a positive and favorable fundraising environment. In 2H17, a significant amount of fundraising is expected of CG, and this should improve the company’s valuation.
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On a pre-tax basis, the company reported DE (distributable earnings) of $55 million in 1Q17, as compared to $128.6 million in 1Q16. Blackstone’s (BX) one-year forward PE ratio stands at 10.99x, while its trailing PE ratio stands at 15.72x. Below are CG’s peers’ one-year forward PE ratios:
CG has a positive outlook of its valuations due to the recent improvements its seeing in the economy and the performance of its portfolio companies. Carlyle saw higher numbers in fee-related earnings in its GMS segment, for example, reporting $3 million in 1Q17, as compared to -$1 million in 1Q16.