• Wondering if Apollo Global Management at around US$109.98 is offering good value, or if the market is asking too much for the stock right now.
• The share price has seen a 1.2% decline over the last week and 3.6% over the past month, set against a 25.0% decline year to date and a 21.4% decline over the last year. The 3 year and 5 year returns sit at 88.1% and 154.6% respectively.
• Recent headlines around Apollo Global Management have focused on its role as a major diversified financial player and its position within alternative asset management. This often puts a spotlight on how markets price its fee streams and investment performance. In this context, it is easier to see why investors may react strongly to shifts in sentiment around interest rates, deal activity or fund flows, even when there is no single company specific announcement driving the move.
• Apollo Global Management currently has a valuation score of 4 out of 6. The next sections will break down how different valuation methods assess the stock, and then finish with a framework that can help you go one step further in judging whether that score fits your own view.

Approach 1: Apollo Global Management Excess Returns Analysis

The Excess Returns model looks at how efficiently a company turns its equity base into profits above the return that shareholders require. Instead of focusing on near term earnings, it tests whether Apollo Global Management is expected to earn more on its equity than its estimated cost of equity over time.

For Apollo Global Management, book value is $37.90 per share, with a stable book value estimate of $61.85 per share, based on future book value estimates from 3 analysts. Stable EPS is $11.36 per share, drawn from weighted future return on equity estimates from 6 analysts, and the average return on equity is 18.36%.

The model applies a cost of equity of $5.18 per share. Against this, the excess return is $6.18 per share, which represents the earnings expected to sit above that required return. When these excess returns are projected and aggregated, the model arrives at an intrinsic value of about $186.36 per share.

Compared with the current share price of about $109.98, the Excess Returns framework implies Apollo Global Management is around 41.0% undervalued.

Result: UNDERVALUED

Our Excess Returns analysis suggests Apollo Global Management is undervalued by 41.0%. Track this in your watchlist or portfolio, or discover 61 more high quality undervalued stocks.

Approach 2: Apollo Global Management Price vs Earnings

P/E is a common way to look at valuation for profitable companies because it links what you pay for each share directly to the earnings that support that share. It is a quick way to see how much the market is willing to pay today for the current earnings stream.

What counts as a "normal" P/E ratio depends a lot on expectations and risk. Higher expected earnings growth or more resilient profit streams can justify a higher P/E, while more uncertainty or weaker profitability typically points to a lower multiple.

Apollo Global Management currently trades on a P/E of 18.15x. That sits slightly above the Diversified Financial industry average of about 17.26x, and above the peer group average of 13.51x. Simply Wall St’s Fair Ratio for Apollo Global Management is 22.80x, which reflects what the P/E might look like after factoring in elements such as earnings growth, profit margins, industry, market cap and company specific risks.

The Fair Ratio can be more informative than a simple comparison with peers or the industry because it adjusts for those company specific drivers rather than treating all firms as identical. With Apollo Global Management’s current P/E of 18.15x below the Fair Ratio of 22.80x, this framework points to the shares being undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose Your Apollo Global Management Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives bring that to life by letting you attach a clear story about Apollo Global Management to the numbers you see. This links your view of its business, future revenue, earnings and margins to a financial forecast, and then to a fair value that can be compared with today’s price.

On Simply Wall St’s Community page, Narratives are available as an easy tool used by millions of investors. They can help you decide whether Apollo Global Management looks more attractive or less attractive by setting a Fair Value and seeing how it lines up against the current share price.

Narratives also respond to new information. When updates arrive, such as the consensus Fair Value of US$158.22 with analyst targets ranging between US$117.70 and US$178.00, or the more optimistic fair value of US$193.00 at the high end of the price target range, the forecast and implied Fair Value can adjust automatically.

For Apollo Global Management, one investor might build a Narrative closer to the lower target of US$117.70, focusing on execution risks or regulatory pressures. Another investor might lean toward US$193.00, focusing on areas such as S&P 500 inclusion, retirement solutions and global industrial exposure. Each can see in real time how their chosen story compares with the current market price.

Do you think there's more to the story for Apollo Global Management? Head over to our Community to see what others are saying!

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.