• Wondering if Apollo Global Management at around US$117 per share is starting to look appealing again, or if the recent weakness is a warning sign for value focused investors like you.
• The stock is down around 6.5% over the last week, 10.9% over the last month and 20.1% year to date, although the 3 year and 5 year returns of 71.3% and 158.5% still show a very different longer term picture.
• Recent headlines have focused on Apollo's role as a major alternative asset manager and on how investors are reassessing risk across higher fee based financials, which helps frame the share price pullback. Broader commentary around interest rate expectations and capital markets activity has also been part of the backdrop investors are reacting to.
• Right now Apollo Global Management has a valuation score of 4/6, based on being assessed as undervalued on four of six checks. Next, we look at what different valuation methods are saying, then finish with a way to put all those models into a clearer big picture.

Approach 1: Apollo Global Management Excess Returns Analysis

The Excess Returns model looks at how efficiently Apollo Global Management turns shareholder equity into earnings, then compares those earnings with the return that investors typically require. The gap between the two is the "excess return" that can justify a higher valuation.

For Apollo, book value is $37.90 per share and the stable earnings per share estimate is $11.36, based on weighted future Return on Equity estimates from 6 analysts. That implies an average Return on Equity of 18.36% on a stable book value base of $61.85 per share, which comes from weighted future Book Value estimates from 3 analysts.

The model assumes investors require a cost of equity of $4.69 per share, while Apollo is estimated to generate $6.67 per share of excess return above that required level. When those excess returns are projected forward and discounted, the model arrives at an intrinsic value of about $221.66 per share.

At a current share price around US$117, the Excess Returns model indicates the stock is 47.1% undervalued on this framework.

Result: UNDERVALUED

Our Excess Returns analysis suggests Apollo Global Management is undervalued by 47.1%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Approach 2: Apollo Global Management Price vs Earnings

For a profitable company like Apollo Global Management, the P/E ratio is a useful shorthand for how much you are paying for each dollar of earnings. It lets you compare what the market is currently willing to pay for Apollo’s earnings with what it pays for similar businesses.

What counts as a "normal" P/E depends on what investors expect from a company’s future earnings and how risky they think those earnings are. Higher growth and lower perceived risk can justify a higher P/E, while more uncertainty or lower growth usually points to a lower multiple.

Apollo is trading on a P/E of 20x. That sits above the Diversified Financial industry average of about 17.4x and above the peer group average of 9.6x. Simply Wall St’s Fair Ratio for Apollo is 23.7x, which is its estimate of an appropriate P/E once factors like earnings growth, industry, profit margins, market cap and risk profile are taken into account.

This Fair Ratio can be more informative than a simple peer or industry comparison because it adjusts for Apollo’s specific characteristics rather than using a one size fits all benchmark. With the current 20x P/E sitting below the 23.7x Fair Ratio, this framework points to Apollo looking undervalued on earnings.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Apollo Global Management Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce Narratives, a simple way for you to attach a clear story to the numbers by linking your view on Apollo Global Management’s future revenue, earnings and margins to a financial forecast, a fair value, and ultimately a decision on whether that fair value looks attractive or not at today’s price. All of this is available within an easy tool on Simply Wall St’s Community page that updates as new earnings or news arrive. One investor might lean toward a higher fair value closer to US$193 if they think themes like industrial transformations and retirement services justify stronger earnings and a higher future P/E. Another might sit nearer US$117 to US$124 if they are more cautious about execution, regulation or revenue trends. Both of those Narratives can co exist side by side on the platform to help you see where your own view fits.

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.