Apollo (APO) Stock Looks Undervalued Even As Caution Holds Back Sentiment

Apollo Global Management has seen its share price move sharply over recent years, and the recent pullback now puts fresh focus on whether the returns it earns on its capital are enough to support where the stock trades today.

• Over the past 5 years the stock has gained 136.6%, which puts a lot of weight on whether Apollo Global Management's underlying return on capital can keep justifying that kind of re-rating.
• Recent headlines around private credit risk and Apollo Global Management's role in complex insurance and loan transactions raise questions about how efficiently the firm can continue to deploy its own and its clients' capital, and what that means for the durability of its returns on that capital.
• If you'd rather focus on earnings, this one's for you. See why Apollo Global Management's 39.7x P/E tells a different valuation story.

The issue now is whether Apollo Global Management's current share price is reasonable when judged against the returns it earns on the capital it puts to work.

If you want more options that put return on capital under the microscope, a focused stock screen is a helpful second lens next to Apollo Global Management, starting with 34 high quality undervalued stocks

Is Apollo Global Management a Bargain on Excess Returns?

The Excess Returns model evaluates what Apollo Global Management can earn above its cost of equity on each dollar of shareholder capital. On this view, the business starts from a Book Value of $34.04 per share and a Stable EPS estimate of $8.01 per share, while the Cost of Equity is $3.64 per share. That leaves an Excess Return of $4.37 per share, supported by an Average Return on Equity of 16.11%. The model uses this to judge whether the current share price of $127.00 is conservative or demanding.

The framework then projects a Stable Book Value of $49.72 per share, based on analyst expectations that Apollo Global Management continues compounding its equity base and reinvesting at similar returns. Because this approach suggests the Excess Returns projections put Apollo Global Management's estimated intrinsic value meaningfully above the current share price, the recent criticism from Michael Burry around private credit and insurance structures helps explain why the price stays below what the Excess Returns model implies. Find out what Apollo Global Management could be worth using our Excess Returns estimate.

The Apollo Global Management Narrative: What Would Justify Today's Price?

Narratives for Apollo Global Management pick up where the valuation puzzle leaves off by spelling out what future path for growth, profit margins and earnings would need to hold for the stock to be worth significantly more or less than today. Instead of a single output from a ratio or model, they lay out the underlying story that number relies on so you can track over time whether Apollo Global Management's actual progress still fits that picture. These live on Simply Wall St's Community page and are built to be read alongside the Excess Returns work above.

One of the top community narratives on Apollo Global Management: 20% undervalued

"Apollo's inclusion in the S&P 500 is expected to broaden its shareholder base, leading to potential growth in public market exposure..."

Discover why this Narrative puts Apollo Global Management at 20% undervalued.

Apollo Global Management’s price is only one piece of the investment puzzle

Before deciding how Apollo Global Management fits into your portfolio, it helps to look at who is steering the enterprise, how they share in its rewards, and what that means for your interests. See who runs Apollo Global Management and how they are paid.

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.

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