KKR & Co LP Stock Valuation – February 2016 $KKR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how KKR & Co LP (KKR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): KKR & CO. L.P. (KKR) is a global investment firm that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate, credit and hedge funds. The Company’s business offers a range of investment management services to its fund investors and provides capital markets services to its firm, its portfolio companies and third parties. The Company operates through three segments: Private Markets, Public Markets, Capital Markets and Other, and Client & Partner Group. Through Private Markets segment, the Company manages and sponsors a group of private equity funds and co-investment vehicles that invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. The Company operates its combined credit and hedge funds businesses through the Public Markets segment. The Capital Markets and Other segment consist primarily of KKR’s global capital markets business.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of KKR

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $10,614,222,032 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 13233233.33% Pass
5. Moderate PEmg Ratio PEmg < 20 9.66 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.95 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

KKR value chart February 2016

EPSmg $1.23
MG Growth Estimate 15.00%
MG Value $47.53
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $17.90
MG Value based on 0% Growth $10.49
Market Implied Growth Rate 0.58%
Current Price $11.93
% of Intrinsic Value 25.10%

KKR & Co. L.P. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.44 in 2011 to an estimated $1.23 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.58% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

KKR & Co. L.P. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

KKR charts February 2016

Graham Number $7.41
PEmg 9.66
PB Ratio 0.95
Dividend Yield 14.08%
Number of Consecutive Years of Dividend Growth 0


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Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Long-Term Debt $16,587,643,000
Total Assets $69,056,926,000
Intangible Assets $0
Total Liabilities $63,398,280,000
Shares Outstanding (Diluted Average) 452,166,000

Earnings Per Share History

Next Fiscal Year Estimate $0.51
Dec2014 $1.16
Dec2013 $2.30
Dec2012 $2.21
Dec2011 $0.01
Dec2010 $1.62

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.23
Dec2014 $1.55
Dec2013 $1.57
Dec2012 $1.06
Dec2011 $0.44
Dec2010 $0.54

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Enterprising Investor – February 2016
7 Best Stocks For Value Investors This Week – 10/24/15
KKR & Co. LP Valuation – October 2015 Update $KKR
5 Undervalued Companies for Value Investors with a High Beta – October 2015
The Best Stocks of the Financial Services Industry – September 2015

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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