Why KKR Discounted Its Valuations after Its 3Q17 Results
One-year forward price-to-earnings ratio
KKR & Co. (KKR) has a one-year forward price-to-earnings ratio of ~8.1x, which represents a discounted valuation. KKR’s competitors’ average one-year forward price-to-earnings ratio stood at ~11.0x.
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KKR’s lower valuations mostly resulted from lower appreciation in its Private Equity portfolio in 3Q17 compared to 3Q16. The company could witness a marginal rise in its valuation in the upcoming months.
In 3Q17, KKR reported distributable earnings (or DE) after tax of $464.5 million on the back of realizations in its Private Markets division. However, KKR reported after-tax DE of $461.5 million in 3Q16.
In 3Q17, KKR reported assets under management (or AUM) of $153.0 billion, which reflects an increase of 17% on a year-over-year basis.
Capital Markets division
KKR & Co.’s Capital Markets division reported a strong performance in 3Q17. The division reported revenues of $85.4 million in 3Q17 compared to $47.4 million in 3Q16. This increase resulted from a rise in the division’s transaction fees.
KKR & Co. has a price-to-earnings ratio of ~8.7x on a trailing-12-month (or TTM) basis. Its peers in the alternative asset manager (XLF) space reported the following price-to-earnings ratio on a TTM basis: