Intrinsic value of Apollo Global Management Cl A - APO

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$26.23

  Intrinsic Value

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  Value-price divergence*

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$26.23

 
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Our model is not good at valuating stocks of financial companies, such as APO.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of APO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  89.06
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,970
  3,152
  4,870
  7,283
  10,567
  14,909
  20,496
  27,511
  36,124
  46,483
  58,712
  72,907
  89,136
  107,438
  127,831
  150,306
  174,842
  201,403
  229,947
  260,427
  292,797
  327,016
  363,047
  400,862
  440,446
  481,791
  524,904
  569,802
  616,516
  665,088
  715,572
Variable operating expenses, $m
 
  1,133
  1,745
  2,605
  3,776
  5,324
  7,315
  9,816
  12,887
  16,579
  20,939
  25,990
  31,775
  38,300
  45,569
  53,581
  62,328
  71,797
  81,972
  92,838
  104,377
  116,575
  129,420
  142,900
  157,011
  171,750
  187,119
  203,124
  219,777
  237,092
  255,089
Fixed operating expenses, $m
 
  478
  490
  502
  514
  527
  540
  554
  568
  582
  597
  611
  627
  642
  658
  675
  692
  709
  727
  745
  764
  783
  802
  822
  843
  864
  886
  908
  930
  954
  977
Total operating expenses, $m
  1,166
  1,611
  2,235
  3,107
  4,290
  5,851
  7,855
  10,370
  13,455
  17,161
  21,536
  26,601
  32,402
  38,942
  46,227
  54,256
  63,020
  72,506
  82,699
  93,583
  105,141
  117,358
  130,222
  143,722
  157,854
  172,614
  188,005
  204,032
  220,707
  238,046
  256,066
Operating income, $m
  804
  1,542
  2,635
  4,176
  6,277
  9,058
  12,640
  17,141
  22,670
  29,322
  37,177
  46,305
  56,734
  68,496
  81,603
  96,050
  111,822
  128,898
  147,248
  166,845
  187,657
  209,658
  232,825
  257,140
  282,592
  309,177
  336,900
  365,770
  395,809
  427,042
  459,506
EBITDA, $m
  823
  1,562
  2,662
  4,211
  6,324
  9,120
  12,723
  17,249
  22,809
  29,498
  37,397
  46,568
  57,055
  68,883
  82,063
  96,591
  112,452
  129,623
  148,076
  167,782
  188,711
  210,835
  234,132
  258,583
  284,178
  310,912
  338,789
  367,822
  398,028
  429,436
  462,082
Interest expense (income), $m
  45
  75
  147
  278
  463
  713
  1,044
  1,470
  2,005
  2,662
  3,452
  4,385
  5,468
  6,706
  8,102
  9,657
  11,371
  13,242
  15,268
  17,445
  19,770
  22,239
  24,849
  27,597
  30,481
  33,500
  36,654
  39,942
  43,367
  46,929
  50,634
Earnings before tax, $m
  1,061
  1,467
  2,488
  3,897
  5,814
  8,345
  11,596
  15,671
  20,665
  26,660
  33,724
  41,920
  51,266
  61,791
  73,501
  86,393
  100,451
  115,655
  131,980
  149,399
  167,887
  187,419
  207,976
  229,543
  252,111
  275,677
  300,246
  325,828
  352,442
  380,113
  408,872
Tax expense, $m
  91
  396
  672
  1,052
  1,570
  2,253
  3,131
  4,231
  5,579
  7,198
  9,106
  11,319
  13,842
  16,683
  19,845
  23,326
  27,122
  31,227
  35,635
  40,338
  45,329
  50,603
  56,153
  61,977
  68,070
  74,433
  81,066
  87,974
  95,159
  102,630
  110,395
Net income, $m
  403
  1,071
  1,816
  2,845
  4,244
  6,092
  8,465
  11,440
  15,085
  19,461
  24,619
  30,602
  37,424
  45,107
  53,656
  63,067
  73,329
  84,428
  96,345
  109,061
  122,557
  136,816
  151,822
  167,566
  184,041
  201,244
  219,179
  237,855
  257,283
  277,482
  298,476

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  855
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,630
  7,632
  11,791
  17,634
  25,586
  36,098
  49,627
  66,614
  87,468
  112,550
  142,160
  176,530
  215,825
  260,142
  309,517
  363,937
  423,346
  487,659
  556,773
  630,574
  708,953
  791,806
  879,047
  970,611
  1,066,455
  1,166,565
  1,270,954
  1,379,667
  1,492,775
  1,610,382
  1,732,619
Adjusted assets (=assets-cash), $m
  4,775
  7,632
  11,791
  17,634
  25,586
  36,098
  49,627
  66,614
  87,468
  112,550
  142,160
  176,530
  215,825
  260,142
  309,517
  363,937
  423,346
  487,659
  556,773
  630,574
  708,953
  791,806
  879,047
  970,611
  1,066,455
  1,166,565
  1,270,954
  1,379,667
  1,492,775
  1,610,382
  1,732,619
Revenue / Adjusted assets
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
  0.413
Average production assets, $m
  54
  85
  131
  197
  285
  403
  553
  743
  975
  1,255
  1,585
  1,968
  2,407
  2,901
  3,451
  4,058
  4,721
  5,438
  6,209
  7,032
  7,906
  8,829
  9,802
  10,823
  11,892
  13,008
  14,172
  15,385
  16,646
  17,957
  19,320
Working capital, $m
  0
  -1,368
  -2,114
  -3,161
  -4,586
  -6,470
  -8,895
  -11,940
  -15,678
  -20,174
  -25,481
  -31,642
  -38,685
  -46,628
  -55,478
  -65,233
  -75,881
  -87,409
  -99,797
  -113,025
  -127,074
  -141,925
  -157,562
  -173,974
  -191,154
  -209,097
  -227,808
  -247,294
  -267,568
  -288,648
  -310,558
Total debt, $m
  2,139
  4,213
  7,956
  13,215
  20,371
  29,832
  42,008
  57,296
  76,065
  98,639
  125,288
  156,221
  191,586
  231,471
  275,909
  324,887
  378,356
  436,238
  498,440
  564,861
  635,401
  709,969
  788,487
  870,894
  957,154
  1,047,252
  1,141,203
  1,239,044
  1,340,841
  1,446,688
  1,556,701
Total liabilities, $m
  4,794
  6,869
  10,612
  15,871
  23,027
  32,488
  44,664
  59,952
  78,721
  101,295
  127,944
  158,877
  194,242
  234,127
  278,565
  327,543
  381,012
  438,894
  501,096
  567,517
  638,057
  712,625
  791,143
  873,550
  959,810
  1,049,908
  1,143,859
  1,241,700
  1,343,497
  1,449,344
  1,559,357
Total equity, $m
  835
  763
  1,179
  1,763
  2,559
  3,610
  4,963
  6,661
  8,747
  11,255
  14,216
  17,653
  21,582
  26,014
  30,952
  36,394
  42,335
  48,766
  55,677
  63,057
  70,895
  79,181
  87,905
  97,061
  106,646
  116,656
  127,095
  137,967
  149,277
  161,038
  173,262
Total liabilities and equity, $m
  5,629
  7,632
  11,791
  17,634
  25,586
  36,098
  49,627
  66,613
  87,468
  112,550
  142,160
  176,530
  215,824
  260,141
  309,517
  363,937
  423,347
  487,660
  556,773
  630,574
  708,952
  791,806
  879,048
  970,611
  1,066,456
  1,166,564
  1,270,954
  1,379,667
  1,492,774
  1,610,382
  1,732,619
Debt-to-equity ratio
  2.562
  5.520
  6.750
  7.490
  7.960
  8.260
  8.460
  8.600
  8.700
  8.760
  8.810
  8.850
  8.880
  8.900
  8.910
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
  8.980
Adjusted equity ratio
  -0.004
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  403
  1,071
  1,816
  2,845
  4,244
  6,092
  8,465
  11,440
  15,085
  19,461
  24,619
  30,602
  37,424
  45,107
  53,656
  63,067
  73,329
  84,428
  96,345
  109,061
  122,557
  136,816
  151,822
  167,566
  184,041
  201,244
  219,179
  237,855
  257,283
  277,482
  298,476
Depreciation, amort., depletion, $m
  19
  20
  26
  35
  47
  63
  83
  108
  139
  176
  220
  262
  321
  387
  460
  541
  629
  725
  828
  938
  1,054
  1,177
  1,307
  1,443
  1,586
  1,734
  1,890
  2,051
  2,219
  2,394
  2,576
Funds from operations, $m
  229
  1,091
  1,843
  2,880
  4,291
  6,154
  8,548
  11,548
  15,224
  19,638
  24,839
  30,864
  37,745
  45,494
  54,116
  63,608
  73,959
  85,153
  97,173
  109,999
  123,611
  137,993
  153,129
  169,009
  185,626
  202,979
  221,069
  239,906
  259,502
  279,877
  301,052
Change in working capital, $m
  -386
  -513
  -746
  -1,047
  -1,425
  -1,884
  -2,425
  -3,045
  -3,738
  -4,496
  -5,307
  -6,161
  -7,043
  -7,943
  -8,850
  -9,754
  -10,649
  -11,528
  -12,388
  -13,228
  -14,049
  -14,851
  -15,637
  -16,412
  -17,179
  -17,944
  -18,711
  -19,486
  -20,274
  -21,080
  -21,910
Cash from operations, $m
  615
  1,598
  2,588
  3,927
  5,717
  8,038
  10,973
  14,593
  18,962
  24,133
  30,146
  37,025
  44,788
  53,437
  62,966
  73,362
  84,607
  96,681
  109,561
  123,227
  137,660
  152,844
  168,767
  185,421
  202,806
  220,923
  239,780
  259,392
  279,776
  300,957
  322,962
Maintenance CAPEX, $m
  0
  -7
  -11
  -18
  -26
  -38
  -54
  -74
  -99
  -130
  -167
  -211
  -262
  -321
  -387
  -460
  -541
  -629
  -725
  -828
  -938
  -1,054
  -1,177
  -1,307
  -1,443
  -1,586
  -1,734
  -1,890
  -2,051
  -2,219
  -2,394
New CAPEX, $m
  -6
  -31
  -46
  -65
  -89
  -117
  -151
  -189
  -233
  -280
  -330
  -383
  -438
  -494
  -551
  -607
  -662
  -717
  -771
  -823
  -874
  -924
  -973
  -1,021
  -1,069
  -1,116
  -1,164
  -1,212
  -1,261
  -1,311
  -1,363
Cash from investing activities, $m
  -183
  -38
  -57
  -83
  -115
  -155
  -205
  -263
  -332
  -410
  -497
  -594
  -700
  -815
  -938
  -1,067
  -1,203
  -1,346
  -1,496
  -1,651
  -1,812
  -1,978
  -2,150
  -2,328
  -2,512
  -2,702
  -2,898
  -3,102
  -3,312
  -3,530
  -3,757
Free cash flow, $m
  432
  1,560
  2,530
  3,845
  5,602
  7,883
  10,768
  14,329
  18,630
  23,724
  29,649
  36,430
  44,088
  52,622
  62,029
  72,295
  83,404
  95,334
  108,065
  121,576
  135,848
  150,866
  166,617
  183,093
  200,294
  218,221
  236,882
  256,290
  276,463
  297,426
  319,205
Issuance/(repayment) of debt, $m
  332
  2,074
  3,743
  5,258
  7,157
  9,461
  12,176
  15,288
  18,769
  22,574
  26,649
  30,933
  35,365
  39,885
  44,438
  48,978
  53,468
  57,882
  62,202
  66,421
  70,541
  74,568
  78,517
  82,407
  86,260
  90,099
  93,950
  97,841
  101,797
  105,846
  110,013
Issuance/(repurchase) of shares, $m
  -13
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  3
  2,074
  3,743
  5,258
  7,157
  9,461
  12,176
  15,288
  18,769
  22,574
  26,649
  30,933
  35,365
  39,885
  44,438
  48,978
  53,468
  57,882
  62,202
  66,421
  70,541
  74,568
  78,517
  82,407
  86,260
  90,099
  93,950
  97,841
  101,797
  105,846
  110,013
Total cash flow (excl. dividends), $m
  435
  3,634
  6,274
  9,103
  12,759
  17,344
  22,944
  29,617
  37,399
  46,298
  56,298
  67,364
  79,453
  92,507
  106,467
  121,273
  136,872
  153,216
  170,267
  187,998
  206,389
  225,434
  245,134
  265,501
  286,554
  308,319
  330,832
  354,131
  378,261
  403,272
  429,218
Retained Cash Flow (-), $m
  -185
  -783
  -416
  -584
  -795
  -1,051
  -1,353
  -1,699
  -2,085
  -2,508
  -2,961
  -3,437
  -3,929
  -4,432
  -4,938
  -5,442
  -5,941
  -6,431
  -6,911
  -7,380
  -7,838
  -8,285
  -8,724
  -9,156
  -9,584
  -10,011
  -10,439
  -10,871
  -11,311
  -11,761
  -12,224
Prev. year cash balance distribution, $m
 
  855
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  3,705
  5,858
  8,519
  11,963
  16,293
  21,591
  27,919
  35,314
  43,789
  53,337
  63,927
  75,524
  88,076
  101,529
  115,831
  130,931
  146,785
  163,356
  180,618
  198,551
  217,148
  236,410
  256,344
  276,969
  298,308
  320,393
  343,260
  366,950
  391,511
  416,995
Discount rate, %
 
  4.40
  4.62
  4.85
  5.09
  5.35
  5.62
  5.90
  6.19
  6.50
  6.83
  7.17
  7.53
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.43
  17.25
  18.11
PV of cash for distribution, $m
 
  3,549
  5,352
  7,390
  9,807
  12,556
  15,556
  18,695
  21,839
  24,842
  27,559
  29,854
  31,619
  32,771
  33,264
  33,089
  32,273
  30,874
  28,976
  26,682
  24,107
  21,366
  18,572
  15,828
  13,218
  10,812
  8,657
  6,780
  5,189
  3,878
  2,828
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Apollo Global Management, LLC is a publicly owned investment manager. The firm primarily provides its services to endowment and sovereign wealth funds, as well as other institutional and individual investors. It manages client focused portfolios. The firm launches and manages hedge funds and mutual funds for its clients. It also manages real estate funds and private equity funds for its clients. The firm invests in the fixed income and alternative investment markets across the globe. Its alternative investments include investment in private equity and real estate markets. The firm's private equity investments include traditional buyouts, recapitalization, distressed buyouts and debt investments in real estate, corporate partner buyouts, distressed asset, corporate carve-outs, turnaround, corporate restructuring, special situation, acquisition, and industry consolidation transactions. Its fixed income investments include income-oriented senior loans, bonds, collateralized loan obligations, structured credit, opportunistic credit, non-performing loans, distressed debt, mezzanine debt, and value oriented fixed income securities. The firm seeks to invest in chemicals, commodities, consumer and retail, oil and gas, metals, mining, agriculture, commodities, distribution and transportation, financial and business services, manufacturing and industrial, media distribution, cable, entertainment and leisure, natural resources, energy, packaging and materials, and satellite and wireless industries. It seeks to invest in companies based in across North America with a focus on United States, and Europe. The firm also makes investments outside North America, primarily in Western Europe and Asia. It employs a combination of contrarian, value, and distressed strategies to make its investments. The firm conducts an in-house research to create its investment portfolio. It seeks to acquire minority positions in its portfolio companies. The firm seeks to make investments in the range of $200 million and $1.5 billion. Apollo Global Management, LLC was founded in 1990 and is headquartered in New York City, with additional offices in New York City; Bethesda, Maryland; Chicago, Illinois; Los Angeles, California; Purchase, New York; Houston, Texas; London, United Kingdom; Frankfurt, Germany; Mumbai, India; Central, Hong Kong; Singapore; and Luxembourg.

FINANCIAL RATIOS  of  Apollo Global Management Cl A (APO)

Valuation Ratios
P/E Ratio 12.1
Price to Sales 2.5
Price to Book 5.8
Price to Tangible Book
Price to Cash Flow 7.9
Price to Free Cash Flow 8
Growth Rates
Sales Growth Rate 89.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -5.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 256.2%
Total Debt to Equity 256.2%
Interest Coverage 25
Management Effectiveness
Return On Assets 8.7%
Ret/ On Assets - 3 Yr. Avg. 3.6%
Return On Total Capital 14.8%
Ret/ On T. Cap. - 3 Yr. Avg. 5.7%
Return On Equity 54.3%
Return On Equity - 3 Yr. Avg. 24.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 57.1%
EBITDA Margin - 3 Yr. Avg. 53.7%
Operating Margin 40.8%
Oper. Margin - 3 Yr. Avg. 31.7%
Pre-Tax Margin 53.9%
Pre-Tax Margin - 3 Yr. Avg. 48.8%
Net Profit Margin 20.5%
Net Profit Margin - 3 Yr. Avg. 14.7%
Effective Tax Rate 8.6%
Eff/ Tax Rate - 3 Yr. Avg. 10.7%
Payout Ratio 59.3%

APO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APO stock intrinsic value calculation we used $1970 million for the last fiscal year's total revenue generated by Apollo Global Management Cl A. The default revenue input number comes from 2016 income statement of Apollo Global Management Cl A. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our APO stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.4%, whose default value for APO is calculated based on our internal credit rating of Apollo Global Management Cl A, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Apollo Global Management Cl A.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of APO stock the variable cost ratio is equal to 36.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $466 million in the base year in the intrinsic value calculation for APO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Apollo Global Management Cl A.

Corporate tax rate of 27% is the nominal tax rate for Apollo Global Management Cl A. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the APO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for APO are equal to 2.7%.

Life of production assets of 7.5 years is the average useful life of capital assets used in Apollo Global Management Cl A operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for APO is equal to -43.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $835 million for Apollo Global Management Cl A - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 190.144 million for Apollo Global Management Cl A is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Apollo Global Management Cl A at the current share price and the inputted number of shares is $5.0 billion.


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Stock chart of APO Financial statements of APO Annual reports of APO
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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