Why Carlyle Has a Lower Valuation



Discounted valuation

The Carlyle Group’s (CG) NTM (next-12-month) PE (price-to-earnings) ratio is 7.7x, lower than competitors’ average of 9.6x. Peers Ameriprise Financial (AMP), Ares Management (ARES), and KKR (KKR) have NTM PE ratios of 9.5x, 11.4x, and 7.9x, respectively.

Carlyle has a lower valuation because of its expected results for 1Q18. Wall Street analysts expect the company’s earnings per share to fall between 1Q17 and 11Q18. Moreover, with a higher valuation, alternative asset managers may be facing deployment difficulties, increasing their dry powder.

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Outflows could also be a reason

Debt markets have witnessed substantial outflows in recent months, which could be the main reason for Carlyle’s lower valuation. These outflows could also impact Carlyle’s Global Credit segment in 1Q18. Alternative asset managers’ credit holdings’ value is impacted by rate hikes, reducing their performance.

Trade war fears could also impact Carlyle’s fundraising activities, as investors may not be interested in advancing funds for investment purposes. Whereas Carlyle’s LTM (last-12-month) PE ratio is 7.4x, peers (XLF) Ameriprise Financial (AMP), Ares Management (ARES), and KKR (KKR) have LTM PE ratios of 12.7x, 33.5x, and 9.3x, respectively.


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