Bond upsizing puts Blue Owl Capital in focus

Blue Owl Capital (OWL) is back on investor radar after affiliate Blue Owl Technology Finance Corp. priced US$400 million of bonds, twice its initial US$200 million target, alongside a larger private credit deal from Blackstone's BCRED.

For context, Blue Owl Capital’s recent bond activity comes as the stock trades at US$11.66, with a 30 day share price return of 22.48% and a 3 year total shareholder return of 22.48%, while the 1 year total shareholder return has declined 34.33%. This suggests that recent momentum has picked up after a weaker period for longer term holders.

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For Blue Owl Capital, the sharp 30 day rebound against a weaker 1 year picture raises a simple question. Are investors reacting to a healthier earnings engine or just rotating back into private credit sentiment that had cooled earlier?

Most Popular Narrative: 5.8% Undervalued

On the most followed narrative, Blue Owl Capital’s fair value sits at $12.38, slightly above the last close at $11.66. This frames the bond upsizing against a modest valuation gap.

Significant ongoing growth in permanent capital vehicles, particularly through expansion in private credit, real assets, and evergreen/interval fund strategies, is providing stable and recurring management fee revenue and positioning Blue Owl for higher future earnings and durable margin expansion.

Curious what has to happen for that fair value to stack up. The narrative leans heavily on fee based growth, rising margins, and a richer future earnings multiple. The exact mix of fundraising, earnings and valuation assumptions may surprise you.

At a discount of around 5.8% to this fair value, the current price flags Blue Owl Capital as slightly undervalued on this framework rather than deeply mispriced. The model anchors on mid single digit revenue growth, a sizeable step up in profitability and a higher return on equity over time, all discounted back at 8.22% to reach today’s estimate.

Result: Fair Value of $12.38 (UNDERVALUED)

However, Blue Owl Capital’s story can change quickly if fundraising stays soft or acquisition integration proves tougher than expected, since both would pressure margins and fee growth assumptions.

Another View on Blue Owl Capital’s Valuation

The earlier fair value of $12.38 for Blue Owl Capital came from a detailed earnings and growth narrative. On a simpler earnings multiple view, the stock looks very different. Blue Owl Capital trades on a P/E of 98.6x, compared with 39x for the US Capital Markets industry, 32.8x for peers, and a fair ratio of 21.5x that the market could move towards over time.

This gap means investors are currently paying more than four times the fair ratio for each dollar of earnings, which raises clear valuation risk if sentiment cools or earnings fall short. The question is whether the growth story is strong enough for you to stay comfortable with that kind of premium.

Next Steps

If this combination of optimism and concern around Blue Owl Capital has you thinking, use the full data to act promptly and form your own view with 2 key rewards and 3 important warning signs

Looking for more investment ideas beyond Blue Owl Capital?

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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.