KKR Stock Is Believed To Be Significantly Overvalued
- By GF Value
The stock of KKR (NYSE:KKR, 30-year Financials) gives every indication of being significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $49.19 per share and the market cap of $28.4 billion, KKR stock gives every indication of being significantly overvalued. GF Value for KKR is shown in the chart below.
Because KKR is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 1% over the past three years and is estimated to grow 8.49% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. KKR has a cash-to-debt ratio of 0.19, which which ranks worse than 81% of the companies in Asset Management industry. The overall financial strength of KKR is 3 out of 10, which indicates that the financial strength of KKR is poor. This is the debt and cash of KKR over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. KKR has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $4.2 billion and earnings of $3.18 a share. Its operating margin is 30.67%, which ranks better than 67% of the companies in Asset Management industry. Overall, GuruFocus ranks the profitability of KKR at 5 out of 10, which indicates fair profitability. This is the revenue and net income of KKR over the past years: