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Carlyle Group (CG) is back in focus after first quarter earnings showed revenue of US$254 million compared with US$973.1 million a year earlier, with a net loss replacing the prior year’s profit.
See our latest analysis for Carlyle Group.
The share price reaction has been tough in the short term, with a 1-day share price return of down 4.04% and year to date down 21.10%. However, over the longer term the 3-year total shareholder return of 91.76% and 5-year total shareholder return of 31.64% show a very different picture. This suggests recent earnings disappointment and the shelf registration news have cooled momentum after a stronger multi year run.
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With Carlyle shares down sharply this year and trading below some analyst price targets and certain intrinsic value estimates, the key question is simple: are you looking at a genuine mispricing or a stock where recent weakness already reflects future growth expectations?
Most Popular Narrative: 22.3% Undervalued
The most followed narrative pegs Carlyle Group’s fair value at $61.81, above the last close of $48.02, and builds a case around expanding products, partnerships and global reach.
Expanding global wealth and broader retail investor participation including new evergreen products (e.g., CAPM, CPEP) and partnerships (e.g., UBS) are driving robust and recurring fundraising, positioning Carlyle to further broaden its AUM base and capture a greater share of the growing demand for private market solutions, which is likely to boost fee revenues and long-term earnings growth.
Curious what sits behind that optimism on fundraising and fees? The narrative leans on a specific mix of growth assumptions, margin uplift and a future earnings multiple that is not random.
Based on this framework, the narrative uses a discount rate of 9.48% and assumes revenue and earnings expansion that support its $61.81 fair value estimate compared with today’s $48.02 share price. It also builds in higher profit margins over time and a P/E level in future years that is lower than one current industry reference point in the Capital Markets space, which helps underpin the conclusion that the current market price leaves a valuation gap.
Result: Fair Value of $61.81 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, there are also clear pressure points, including fee competition from other alternative managers and the risk that fundraising or deal activity slows more than analysts currently factor in.
Find out about the key risks to this Carlyle Group narrative.
Next Steps
With sentiment clearly split between concern and optimism, this is a good time to move fast, review the underlying data yourself, and weigh the 3 key rewards and 4 important warning signs.
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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 CG.
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