Intrinsic value of KKR - KKR

Previous Close

$19.38

  Intrinsic Value

$58.07

stock screener

  Rating & Target

str. buy

+200%

  Value-price divergence*

0%

Previous close

$19.38

 
Intrinsic value

$58.07

 
Up/down potential

+200%

 
Rating

str. buy

 
Value-price divergence*

0%

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

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

We calculate the intrinsic value of KKR 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 15.5

 

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, %
  82.76
  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
  1,908
  3,053
  4,717
  7,054
  10,234
  14,439
  19,851
  26,646
  34,987
  45,020
  56,864
  70,612
  86,330
  104,057
  123,807
  145,576
  169,339
  195,065
  222,710
  252,231
  283,582
  316,724
  351,621
  388,246
  426,584
  466,628
  508,384
  551,869
  597,113
  644,156
  693,051
Variable operating expenses, $m
 
  5,465
  8,439
  12,616
  18,301
  25,817
  35,489
  47,633
  62,543
  80,475
  101,644
  126,208
  154,301
  185,985
  221,286
  260,192
  302,666
  348,646
  398,058
  450,821
  506,857
  566,092
  628,464
  693,927
  762,449
  834,021
  908,653
  986,376
  1,067,241
  1,151,323
  1,238,715
Fixed operating expenses, $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
Total operating expenses, $m
  1,695
  5,465
  8,439
  12,616
  18,301
  25,817
  35,489
  47,633
  62,543
  80,475
  101,644
  126,208
  154,301
  185,985
  221,286
  260,192
  302,666
  348,646
  398,058
  450,821
  506,857
  566,092
  628,464
  693,927
  762,449
  834,021
  908,653
  986,376
  1,067,241
  1,151,323
  1,238,715
Operating income, $m
  213
  -2,412
  -3,722
  -5,562
  -8,067
  -11,378
  -15,638
  -20,988
  -27,556
  -35,455
  -44,780
  -55,596
  -67,971
  -81,928
  -97,478
  -114,617
  -133,327
  -153,581
  -175,348
  -198,590
  -223,275
  -249,368
  -276,843
  -305,680
  -335,865
  -367,393
  -400,269
  -434,506
  -470,128
  -507,167
  -545,664
EBITDA, $m
  213
  -2,338
  -3,612
  -5,402
  -7,838
  -11,058
  -15,202
  -20,406
  -26,795
  -34,478
  -43,549
  -54,077
  -66,115
  -79,691
  -94,816
  -111,487
  -129,686
  -149,388
  -170,559
  -193,167
  -217,177
  -242,558
  -269,284
  -297,333
  -326,693
  -357,361
  -389,339
  -422,641
  -457,290
  -493,317
  -530,763
Interest expense (income), $m
  773
  760
  1,557
  2,730
  4,378
  6,620
  9,585
  13,400
  18,191
  24,072
  31,146
  39,496
  49,189
  60,271
  72,769
  86,694
  102,041
  118,796
  136,933
  156,424
  177,237
  199,341
  222,708
  247,311
  273,134
  300,163
  328,396
  357,836
  388,494
  420,393
  453,560
Earnings before tax, $m
  975
  -3,173
  -5,279
  -8,293
  -12,445
  -17,998
  -25,223
  -34,388
  -45,747
  -59,527
  -75,926
  -95,092
  -117,160
  -142,199
  -170,247
  -201,311
  -235,368
  -272,377
  -312,281
  -355,015
  -400,512
  -448,709
  -499,551
  -552,991
  -608,999
  -667,556
  -728,665
  -792,342
  -858,623
  -927,560
  -999,224
Tax expense, $m
  24
  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
Net income, $m
  309
  -3,173
  -5,279
  -8,293
  -12,445
  -17,998
  -25,223
  -34,388
  -45,747
  -59,527
  -75,926
  -95,092
  -117,160
  -142,199
  -170,247
  -201,311
  -235,368
  -272,377
  -312,281
  -355,015
  -400,512
  -448,709
  -499,551
  -552,991
  -608,999
  -667,556
  -728,665
  -792,342
  -858,623
  -927,560
  -999,224

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  4,134
  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
  39,003
  59,859
  92,482
  138,307
  200,676
  283,125
  389,231
  522,462
  686,026
  882,749
  1,114,984
  1,384,557
  1,692,753
  2,040,337
  2,427,598
  2,854,424
  3,320,381
  3,824,800
  4,366,868
  4,945,705
  5,560,440
  6,210,273
  6,894,524
  7,612,674
  8,364,396
  9,149,575
  9,968,319
  10,820,969
  11,708,098
  12,630,510
  13,589,238
Adjusted assets (=assets-cash), $m
  34,869
  59,859
  92,482
  138,307
  200,676
  283,125
  389,231
  522,462
  686,026
  882,749
  1,114,984
  1,384,557
  1,692,753
  2,040,337
  2,427,598
  2,854,424
  3,320,381
  3,824,800
  4,366,868
  4,945,705
  5,560,440
  6,210,273
  6,894,524
  7,612,674
  8,364,396
  9,149,575
  9,968,319
  10,820,969
  11,708,098
  12,630,510
  13,589,238
Revenue / Adjusted assets
  0.055
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
Average production assets, $m
  411
  656
  1,014
  1,517
  2,200
  3,104
  4,268
  5,729
  7,522
  9,679
  12,226
  15,182
  18,561
  22,372
  26,619
  31,299
  36,408
  41,939
  47,883
  54,230
  60,970
  68,096
  75,598
  83,473
  91,716
  100,325
  109,303
  118,652
  128,379
  138,494
  149,006
Working capital, $m
  0
  -305
  -472
  -705
  -1,023
  -1,444
  -1,985
  -2,665
  -3,499
  -4,502
  -5,686
  -7,061
  -8,633
  -10,406
  -12,381
  -14,558
  -16,934
  -19,506
  -22,271
  -25,223
  -28,358
  -31,672
  -35,162
  -38,825
  -42,658
  -46,663
  -50,838
  -55,187
  -59,711
  -64,416
  -69,305
Total debt, $m
  18,544
  37,977
  66,588
  106,776
  161,474
  233,781
  326,837
  443,680
  587,126
  759,652
  963,322
  1,199,737
  1,470,026
  1,774,856
  2,114,484
  2,488,811
  2,897,455
  3,339,830
  3,815,224
  4,322,864
  4,861,987
  5,431,891
  6,031,979
  6,661,796
  7,321,057
  8,009,658
  8,727,697
  9,475,471
  10,253,483
  11,062,438
  11,903,242
Total liabilities, $m
  33,063
  52,496
  81,107
  121,295
  175,993
  248,300
  341,356
  458,199
  601,645
  774,171
  977,841
  1,214,256
  1,484,545
  1,789,375
  2,129,003
  2,503,330
  2,911,974
  3,354,349
  3,829,743
  4,337,383
  4,876,506
  5,446,410
  6,046,498
  6,676,315
  7,335,576
  8,024,177
  8,742,216
  9,489,990
  10,268,002
  11,076,957
  11,917,761
Total equity, $m
  5,940
  7,363
  11,375
  17,012
  24,683
  34,824
  47,875
  64,263
  84,381
  108,578
  137,143
  170,300
  208,209
  250,961
  298,595
  351,094
  408,407
  470,450
  537,125
  608,322
  683,934
  763,864
  848,026
  936,359
  1,028,821
  1,125,398
  1,226,103
  1,330,979
  1,440,096
  1,553,553
  1,671,476
Total liabilities and equity, $m
  39,003
  59,859
  92,482
  138,307
  200,676
  283,124
  389,231
  522,462
  686,026
  882,749
  1,114,984
  1,384,556
  1,692,754
  2,040,336
  2,427,598
  2,854,424
  3,320,381
  3,824,799
  4,366,868
  4,945,705
  5,560,440
  6,210,274
  6,894,524
  7,612,674
  8,364,397
  9,149,575
  9,968,319
  10,820,969
  11,708,098
  12,630,510
  13,589,237
Debt-to-equity ratio
  3.122
  5.160
  5.850
  6.280
  6.540
  6.710
  6.830
  6.900
  6.960
  7.000
  7.020
  7.040
  7.060
  7.070
  7.080
  7.090
  7.090
  7.100
  7.100
  7.110
  7.110
  7.110
  7.110
  7.110
  7.120
  7.120
  7.120
  7.120
  7.120
  7.120
  7.120
Adjusted equity ratio
  0.052
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  309
  -3,173
  -5,279
  -8,293
  -12,445
  -17,998
  -25,223
  -34,388
  -45,747
  -59,527
  -75,926
  -95,092
  -117,160
  -142,199
  -170,247
  -201,311
  -235,368
  -272,377
  -312,281
  -355,015
  -400,512
  -448,709
  -499,551
  -552,991
  -608,999
  -667,556
  -728,665
  -792,342
  -858,623
  -927,560
  -999,224
Depreciation, amort., depletion, $m
  0
  75
  110
  161
  229
  319
  436
  582
  761
  977
  1,231
  1,518
  1,856
  2,237
  2,662
  3,130
  3,641
  4,194
  4,788
  5,423
  6,097
  6,810
  7,560
  8,347
  9,172
  10,033
  10,930
  11,865
  12,838
  13,849
  14,901
Funds from operations, $m
  -3,159
  -3,098
  -5,169
  -8,132
  -12,216
  -17,679
  -24,787
  -33,806
  -44,985
  -58,550
  -74,694
  -93,574
  -115,304
  -139,962
  -167,585
  -198,181
  -231,727
  -268,183
  -307,492
  -349,592
  -394,415
  -441,900
  -491,991
  -544,644
  -599,827
  -657,524
  -717,735
  -780,477
  -845,785
  -913,710
  -984,323
Change in working capital, $m
  -1,597
  -114
  -166
  -234
  -318
  -420
  -541
  -679
  -834
  -1,003
  -1,184
  -1,375
  -1,572
  -1,773
  -1,975
  -2,177
  -2,376
  -2,573
  -2,765
  -2,952
  -3,135
  -3,314
  -3,490
  -3,663
  -3,834
  -4,004
  -4,176
  -4,349
  -4,524
  -4,704
  -4,890
Cash from operations, $m
  -1,562
  -2,984
  -5,003
  -7,898
  -11,898
  -17,258
  -24,246
  -33,127
  -44,151
  -57,547
  -73,510
  -92,199
  -113,732
  -138,189
  -165,610
  -196,004
  -229,351
  -265,611
  -304,728
  -346,640
  -391,280
  -438,586
  -488,501
  -540,981
  -595,993
  -653,519
  -713,559
  -776,128
  -841,260
  -909,006
  -979,434
Maintenance CAPEX, $m
  0
  -41
  -66
  -101
  -152
  -220
  -310
  -427
  -573
  -752
  -968
  -1,223
  -1,518
  -1,856
  -2,237
  -2,662
  -3,130
  -3,641
  -4,194
  -4,788
  -5,423
  -6,097
  -6,810
  -7,560
  -8,347
  -9,172
  -10,033
  -10,930
  -11,865
  -12,838
  -13,849
New CAPEX, $m
  -63
  -245
  -358
  -502
  -684
  -904
  -1,163
  -1,461
  -1,793
  -2,157
  -2,546
  -2,956
  -3,379
  -3,811
  -4,246
  -4,680
  -5,109
  -5,531
  -5,944
  -6,347
  -6,741
  -7,125
  -7,503
  -7,875
  -8,243
  -8,609
  -8,978
  -9,349
  -9,727
  -10,114
  -10,512
Cash from investing activities, $m
  -63
  -286
  -424
  -603
  -836
  -1,124
  -1,473
  -1,888
  -2,366
  -2,909
  -3,514
  -4,179
  -4,897
  -5,667
  -6,483
  -7,342
  -8,239
  -9,172
  -10,138
  -11,135
  -12,164
  -13,222
  -14,313
  -15,435
  -16,590
  -17,781
  -19,011
  -20,279
  -21,592
  -22,952
  -24,361
Free cash flow, $m
  -1,625
  -3,270
  -5,426
  -8,502
  -12,733
  -18,382
  -25,720
  -35,015
  -46,518
  -60,456
  -77,024
  -96,377
  -118,630
  -143,856
  -172,094
  -203,346
  -237,590
  -274,782
  -314,866
  -357,775
  -403,443
  -451,808
  -502,814
  -556,416
  -612,583
  -671,300
  -732,569
  -796,408
  -862,853
  -931,958
  -1,003,795
Issuance/(repayment) of debt, $m
  2,116
  19,433
  28,610
  40,188
  54,698
  72,308
  93,055
  116,844
  143,445
  172,526
  203,670
  236,416
  270,288
  304,831
  339,628
  374,326
  408,644
  442,376
  475,393
  507,640
  539,123
  569,903
  600,088
  629,818
  659,260
  688,602
  718,039
  747,774
  778,012
  808,955
  840,804
Issuance/(repurchase) of shares, $m
  432
  5,899
  9,292
  13,929
  20,116
  28,139
  38,274
  50,776
  65,865
  83,724
  104,491
  128,249
  155,068
  184,952
  217,880
  253,810
  292,681
  334,421
  378,955
  426,212
  476,124
  528,639
  583,714
  641,324
  701,460
  764,133
  829,370
  897,218
  967,739
  1,041,016
  1,117,147
Cash from financing (excl. dividends), $m  
  3,394
  25,332
  37,902
  54,117
  74,814
  100,447
  131,329
  167,620
  209,310
  256,250
  308,161
  364,665
  425,356
  489,783
  557,508
  628,136
  701,325
  776,797
  854,348
  933,852
  1,015,247
  1,098,542
  1,183,802
  1,271,142
  1,360,720
  1,452,735
  1,547,409
  1,644,992
  1,745,751
  1,849,971
  1,957,951
Total cash flow (excl. dividends), $m
  1,769
  22,062
  32,476
  45,615
  62,081
  82,064
  105,609
  132,605
  162,793
  195,794
  231,136
  268,288
  306,727
  345,926
  385,415
  424,791
  463,735
  502,014
  539,483
  576,077
  611,804
  646,734
  680,988
  714,726
  748,138
  781,435
  814,840
  848,584
  882,898
  918,014
  954,156
Retained Cash Flow (-), $m
  -393
  -5,899
  -9,292
  -13,929
  -20,116
  -28,139
  -38,274
  -50,776
  -65,865
  -83,724
  -104,491
  -128,249
  -155,068
  -184,952
  -217,880
  -253,810
  -292,681
  -334,421
  -378,955
  -426,212
  -476,124
  -528,639
  -583,714
  -641,324
  -701,460
  -764,133
  -829,370
  -897,218
  -967,739
  -1,041,016
  -1,117,147
Prev. year cash balance distribution, $m
 
  1,304
  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
 
  17,467
  23,184
  31,686
  41,965
  53,925
  67,335
  81,829
  96,928
  112,070
  126,646
  140,038
  151,659
  160,974
  167,534
  170,980
  171,054
  167,593
  160,528
  149,866
  135,680
  118,095
  97,274
  73,402
  46,677
  17,301
  -14,531
  -48,634
  -84,841
  -123,003
  -162,991
Discount rate, %
 
  10.70
  11.24
  11.80
  12.39
  13.01
  13.66
  14.34
  15.06
  15.81
  16.60
  17.43
  18.30
  19.22
  20.18
  21.19
  22.24
  23.36
  24.52
  25.75
  27.04
  28.39
  29.81
  31.30
  32.87
  34.51
  36.23
  38.05
  39.95
  41.95
  44.04
PV of cash for distribution, $m
 
  15,779
  18,737
  22,677
  26,304
  29,261
  31,238
  32,029
  31,563
  29,910
  27,267
  23,917
  20,185
  16,384
  12,783
  9,576
  6,878
  4,726
  3,097
  1,928
  1,132
  621
  313
  140
  51
  10
  -5
  -8
  -7
  -5
  -3
Current shareholders' claim on cash, %
  100
  67.3
  45.4
  30.9
  21.3
  14.8
  10.4
  7.4
  5.3
  3.9
  2.8
  2.1
  1.5
  1.2
  0.9
  0.7
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

KKR & Co. L.P. is a private equity and real estate investment firm specializing in direct and fund of fund investments. It specializes in acquisitions, leveraged buyouts, management buyouts, credit special situations, growth equity, mature, mezzanine, distressed, and middle market investments. The firm considers investments in all industries with a focus on software, security, semiconductors, consumer electronics, internet of things (iot), internet, information services, content, technology and hardware, energy and infrastructure, real estate, services industry with a focus on business services, intelligence, industry-leading franchises and companies in natural resource, containers and packaging, agriculture, airports, ports, forestry, electric utilities, textiles, apparel and luxury goods, household durables, digital media, insurance, brokerage houses, non-durable goods distribution, supermarket retailing, grocery stores, food, beverage, and tobacco, hospitals, entertainment venues and production companies, publishing, printing services, capital goods, financial services, specialized finance, pipelines, and renewable energy. In energy and infrastructure, it focuses on the Upstream Oil and Gas and Equipment and Services verticals. In real estate, the firm seeks to invest in private and public real estate securities including property-level equity, debt and special situations transactions and businesses with significant real estate holdings, and oil and natural gas properties. The firm also invests in asset services sector that encompasses a broad array of B2B, B2C and B2G services verticals including asset-based, transport, logistics, leisure/hospitality, resource and utility support, infra-like, mission-critical, and environmental services. Within Americas, the firm prefers to invest in consumer products; chemicals, metals and mining; energy and natural resources; financial services; healthcare; industrials; media and communications; retail; and technology. Within Europe, the firm invests in consumer and retail; energy; financial services; health care; industrials and chemicals; media and digital; and telecom and technologies. Within Asia, it invests in consumer products; energy and resources; financial services; healthcare; industrials; logistics; media and telecom; retail; real estate; and technology. The firm seeks to invest in mid to high-end residential developments, but can invest in other projects throughout Mainland China through outright ownership, joint ventures, and merger. It invests globally with a focus on Australia, emerging and developed Asia, Middle East and Africa, Nordic, Southeast Asia, Asia Pacific, Ireland, Hong Kong, Japan, Taiwan, India, Vietnam, Indonesia, France, Germany, Netherlands, United Kingdom, Caribbean, Mexico, South America, North America, Brazil, Latin America, Korea, and United States of America. In the United States and Europe, the firm focuses on buyouts of large, publicly traded companies. It seeks to invest $30 million to $717 million in companies with enterprise values between $500 million to $2389 million. The firm prefers to invest in a range of debt and public equity investing and may co-invest. It seeks a board seat in its portfolio companies and a controlling ownership of a company or a strategic minority positions. The firm may acquire minority equity interests, particularly when making private equity investments in Asia or sponsoring investments as part of a large investor consortium. The firm typically holds its investment for a period of five to seven years and more and exits through initial public offerings, secondary offerings, and sales to strategic buyers. KKR & Co. L.P. was founded in 1976 and is based in New York, New York with additional offices across North America, Europe, Australia, and Asia.

FINANCIAL RATIOS  of  KKR (KKR)

Valuation Ratios
P/E Ratio 28.4
Price to Sales 4.6
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow -5.6
Price to Free Cash Flow -5.4
Growth Rates
Sales Growth Rate 82.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -62.7%
Cap. Spend. - 3 Yr. Gr. Rate 35.1%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 312.2%
Total Debt to Equity 312.2%
Interest Coverage 2
Management Effectiveness
Return On Assets 1.9%
Ret/ On Assets - 3 Yr. Avg. 1.5%
Return On Total Capital 1.3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.8%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. 8.7%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 91.6%
EBITDA Margin - 3 Yr. Avg. 386.4%
Operating Margin 11.2%
Oper. Margin - 3 Yr. Avg. -55.3%
Pre-Tax Margin 51.1%
Pre-Tax Margin - 3 Yr. Avg. 351.5%
Net Profit Margin 16.2%
Net Profit Margin - 3 Yr. Avg. 35.3%
Effective Tax Rate 2.5%
Eff/ Tax Rate - 3 Yr. Avg. 1.6%
Payout Ratio 99.7%

KKR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KKR stock intrinsic value calculation we used $1908 million for the last fiscal year's total revenue generated by KKR. The default revenue input number comes from 2016 income statement of KKR. 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 KKR 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 10.7%, whose default value for KKR is calculated based on our internal credit rating of KKR, 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 KKR.
    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 KKR stock the variable cost ratio is equal to 179.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for KKR 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 4.1% for KKR.

Corporate tax rate of 27% is the nominal tax rate for KKR. 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 KKR 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 KKR are equal to 21.5%.

Life of production assets of 10 years is the average useful life of capital assets used in KKR 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 KKR is equal to -10%. 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 - $5940 million for KKR - 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 801.98 million for KKR 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 KKR at the current share price and the inputted number of shares is $15.5 billion.

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COMPANY NEWS

▶ How Tourist Capital Is Screwing Up Tech Investing   [Jul-18-17 01:10PM  Fortune]
▶ [$$] A New Generation Is Poised to Take Control of KKR   [12:46AM  The Wall Street Journal]
▶ [$$] A New Generation Is Poised to Take Control of KKR   [Jul-17-17 06:46PM  The Wall Street Journal]
▶ KKR's Changing of the Guard   [02:53PM  TheStreet.com]
▶ Game of Thrones, Private Equity Style   [10:22AM  Bloomberg]
▶ KKR Partners with Radiant Life Care   [08:30AM  Business Wire]
▶ KKR & Co. L.P. to Announce Second Quarter 2017 Results   [Jul-13-17 05:00PM  Business Wire]
▶ KKRs Henry McVeys Five Areas of Focus   [06:59AM  Business Wire]
▶ [$$] KKR Appoints Financial Chiefs for Europe and Asia   [Jul-11-17 04:11PM  The Wall Street Journal]
▶ [$$] KKR-Backed Media Group Makes 230 Million Add-On Deal   [11:24AM  The Wall Street Journal]
▶ [$$] Deal Close Announcements: July 3-7   [Jul-07-17 06:53PM  The Wall Street Journal]
▶ [$$] Entellus Medical Agrees to Acquire KKR-Backed Spirox   [12:05PM  The Wall Street Journal]
▶ [$$] Vocus to Open Books to Suitor KKR   [Jul-05-17 08:49PM  The Wall Street Journal]
▶ [$$] Australia's Vocus to Open Books to Suitor KKR   [11:25AM  The Wall Street Journal]
▶ [$$] KKR Credit Advisors Looks at Buying Australia's Pepper Group   [Jul-04-17 11:36PM  The Wall Street Journal]
▶ [$$] Vocus to Open Books to Suitor KKR   [07:17PM  The Wall Street Journal]
▶ Angelica Corporation Completes Sale to KKR   [Jun-30-17 06:49PM  PR Newswire]
▶ KKR to Partner with Dixon Hospitality   [03:03AM  Business Wire]
▶ [$$] Toshiba says agreement on sale of chip unit delayed   [Jun-27-17 09:04PM  Financial Times]
▶ MOVES- Citi, Stifel, Barclays, Aviva   [Jun-21-17 04:28PM  Reuters]
▶ KKR Names Head of KKR Capital Markets Japan   [Jun-20-17 11:32PM  Business Wire]
▶ Mills Fleet Farm names new CEO   [10:09AM  American City Business Journals]
▶ KKR's Junkyard Sees Value in Vocus   [12:13AM  Bloomberg]
▶ [$$] Comings & Goings   [Jun-05-17 09:46AM  The Wall Street Journal]
▶ KKR With One Eye on Japan Makes Sense   [Jun-04-17 04:00PM  Bloomberg]
▶ [$$] KKR Closes $9.3 Billion Asia Private-Equity Fund   [10:45PM  The Wall Street Journal]
▶ KKR Closes US$9.3 Billion Asian Fund III   [10:30PM  Business Wire]
▶ Top 4 Financial Stocks for 2017   [May-31-17 06:00AM  Investopedia]
▶ KKR to Present at the Morgan Stanley Financials Conference   [May-30-17 05:00PM  Business Wire]
Stock chart of KKR Financial statements of KKR Annual reports of KKR
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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