Intrinsic value of KKR - KKR

Previous Close

$18.93

  Intrinsic Value

$33.05

stock screener

  Rating & Target

str. buy

+75%

  Value-price divergence*

-121%

Previous close

$18.93

 
Intrinsic value

$33.05

 
Up/down potential

+75%

 
Rating

str. buy

 
Value-price divergence*

-121%

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 15.6

 

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
  1,453
  2,569
  4,137
  6,271
  9,092
  12,723
  17,281
  22,878
  29,609
  37,555
  46,779
  57,325
  69,218
  82,468
  97,073
  113,016
  130,275
  148,823
  168,629
  189,663
  211,898
  235,310
  259,883
  285,604
  312,470
  340,484
  369,659
  400,013
  431,575
Earnings before tax, $m
  975
  -3,173
  -5,175
  -8,132
  -12,204
  -17,649
  -24,730
  -33,711
  -44,837
  -58,333
  -74,389
  -93,151
  -114,750
  -139,252
  -166,696
  -197,085
  -230,400
  -266,597
  -305,623
  -347,413
  -391,903
  -439,031
  -488,741
  -540,990
  -595,748
  -652,997
  -712,739
  -774,991
  -839,787
  -907,180
  -977,239
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
  -5,175
  -8,132
  -12,204
  -17,649
  -24,730
  -33,711
  -44,837
  -58,333
  -74,389
  -93,151
  -114,750
  -139,252
  -166,696
  -197,085
  -230,400
  -266,597
  -305,623
  -347,413
  -391,903
  -439,031
  -488,741
  -540,990
  -595,748
  -652,997
  -712,739
  -774,991
  -839,787
  -907,180
  -977,239

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
  55,505
  85,756
  128,248
  186,081
  262,534
  360,924
  484,465
  636,133
  818,549
  1,033,894
  1,283,862
  1,569,644
  1,891,949
  2,251,045
  2,646,830
  3,078,898
  3,546,633
  4,049,277
  4,586,017
  5,156,045
  5,758,617
  6,393,104
  7,059,025
  7,756,077
  8,484,152
  9,243,351
  10,033,990
  10,856,600
  11,711,927
  12,600,929
Adjusted assets (=assets-cash), $m
  34,869
  55,505
  85,756
  128,248
  186,081
  262,534
  360,924
  484,465
  636,133
  818,549
  1,033,894
  1,283,862
  1,569,644
  1,891,949
  2,251,045
  2,646,830
  3,078,898
  3,546,633
  4,049,277
  4,586,017
  5,156,045
  5,758,617
  6,393,104
  7,059,025
  7,756,077
  8,484,152
  9,243,351
  10,033,990
  10,856,600
  11,711,927
  12,600,929
Revenue / Adjusted assets
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
  0.055
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
  -6,615
  -10,221
  -15,285
  -22,178
  -31,290
  -43,017
  -57,741
  -75,818
  -97,559
  -123,225
  -153,017
  -187,078
  -225,492
  -268,291
  -315,462
  -366,958
  -422,705
  -482,613
  -546,584
  -614,523
  -686,341
  -761,962
  -841,330
  -924,408
  -1,011,184
  -1,101,669
  -1,195,901
  -1,293,944
  -1,395,886
  -1,501,842
Total debt, $m
  18,544
  35,436
  62,661
  100,904
  152,954
  221,762
  310,312
  421,500
  558,001
  722,175
  915,985
  1,140,956
  1,398,160
  1,688,235
  2,011,422
  2,367,628
  2,756,489
  3,177,450
  3,629,831
  4,112,897
  4,625,921
  5,168,236
  5,739,275
  6,338,604
  6,965,950
  7,621,217
  8,304,497
  9,016,072
  9,756,421
  10,526,216
  11,326,317
Total liabilities, $m
  33,063
  49,955
  77,180
  115,423
  167,473
  236,281
  324,831
  436,019
  572,520
  736,694
  930,504
  1,155,475
  1,412,679
  1,702,754
  2,025,941
  2,382,147
  2,771,008
  3,191,969
  3,644,350
  4,127,416
  4,640,440
  5,182,755
  5,753,794
  6,353,123
  6,980,469
  7,635,736
  8,319,016
  9,030,591
  9,770,940
  10,540,735
  11,340,836
Total equity, $m
  5,940
  5,551
  8,576
  12,825
  18,608
  26,253
  36,092
  48,447
  63,613
  81,855
  103,389
  128,386
  156,964
  189,195
  225,105
  264,683
  307,890
  354,663
  404,928
  458,602
  515,604
  575,862
  639,310
  705,903
  775,608
  848,415
  924,335
  1,003,399
  1,085,660
  1,171,193
  1,260,093
Total liabilities and equity, $m
  39,003
  55,506
  85,756
  128,248
  186,081
  262,534
  360,923
  484,466
  636,133
  818,549
  1,033,893
  1,283,861
  1,569,643
  1,891,949
  2,251,046
  2,646,830
  3,078,898
  3,546,632
  4,049,278
  4,586,018
  5,156,044
  5,758,617
  6,393,104
  7,059,026
  7,756,077
  8,484,151
  9,243,351
  10,033,990
  10,856,600
  11,711,928
  12,600,929
Debt-to-equity ratio
  3.122
  6.380
  7.310
  7.870
  8.220
  8.450
  8.600
  8.700
  8.770
  8.820
  8.860
  8.890
  8.910
  8.920
  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
  8.990
  8.990
  8.990
  8.990
Adjusted equity ratio
  0.052
  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
  309
  -3,173
  -5,175
  -8,132
  -12,204
  -17,649
  -24,730
  -33,711
  -44,837
  -58,333
  -74,389
  -93,151
  -114,750
  -139,252
  -166,696
  -197,085
  -230,400
  -266,597
  -305,623
  -347,413
  -391,903
  -439,031
  -488,741
  -540,990
  -595,748
  -652,997
  -712,739
  -774,991
  -839,787
  -907,180
  -977,239
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
  -5,065
  -7,971
  -11,975
  -17,329
  -24,295
  -33,129
  -44,076
  -57,356
  -73,158
  -91,633
  -112,894
  -137,015
  -164,034
  -193,955
  -226,759
  -262,404
  -300,835
  -341,990
  -385,806
  -432,221
  -481,181
  -532,643
  -586,576
  -642,964
  -701,809
  -763,126
  -826,949
  -893,331
  -962,338
Change in working capital, $m
  -1,597
  -2,481
  -3,605
  -5,064
  -6,893
  -9,112
  -11,727
  -14,724
  -18,077
  -21,741
  -25,666
  -29,792
  -34,061
  -38,414
  -42,799
  -47,172
  -51,496
  -55,747
  -59,908
  -63,971
  -67,939
  -71,818
  -75,621
  -79,368
  -83,078
  -86,776
  -90,485
  -94,232
  -98,043
  -101,942
  -105,956
Cash from operations, $m
  -1,562
  -617
  -1,460
  -2,907
  -5,082
  -8,217
  -12,568
  -18,405
  -25,999
  -35,615
  -47,492
  -61,840
  -78,833
  -98,601
  -121,235
  -146,784
  -175,263
  -206,657
  -240,927
  -278,019
  -317,868
  -360,404
  -405,560
  -453,275
  -503,498
  -556,189
  -611,323
  -668,893
  -728,906
  -791,389
  -856,382
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
  -904
  -1,883
  -3,511
  -5,918
  -9,341
  -14,042
  -20,292
  -28,366
  -38,524
  -51,006
  -66,019
  -83,731
  -104,269
  -127,718
  -154,126
  -183,502
  -215,828
  -251,065
  -289,154
  -330,031
  -373,626
  -419,872
  -468,710
  -520,088
  -573,970
  -630,334
  -689,173
  -750,499
  -814,341
  -880,744
Issuance/(repayment) of debt, $m
  2,116
  16,892
  27,225
  38,243
  52,050
  68,807
  88,551
  111,187
  136,501
  164,174
  193,810
  224,971
  257,204
  290,074
  323,187
  356,206
  388,862
  420,961
  452,380
  483,066
  513,025
  542,315
  571,038
  599,329
  627,346
  655,267
  683,279
  711,575
  740,349
  769,795
  800,102
Issuance/(repurchase) of shares, $m
  432
  6,917
  8,200
  12,381
  17,987
  25,294
  34,569
  46,065
  60,004
  76,574
  95,924
  118,148
  143,328
  171,483
  202,605
  236,664
  273,607
  313,371
  355,888
  401,087
  448,906
  499,288
  552,190
  607,582
  665,453
  725,804
  788,659
  854,055
  922,048
  992,713
  1,066,139
Cash from financing (excl. dividends), $m  
  3,394
  23,809
  35,425
  50,624
  70,037
  94,101
  123,120
  157,252
  196,505
  240,748
  289,734
  343,119
  400,532
  461,557
  525,792
  592,870
  662,469
  734,332
  808,268
  884,153
  961,931
  1,041,603
  1,123,228
  1,206,911
  1,292,799
  1,381,071
  1,471,938
  1,565,630
  1,662,397
  1,762,508
  1,866,241
Total cash flow (excl. dividends), $m
  1,769
  22,905
  33,543
  47,113
  64,120
  84,760
  109,078
  136,960
  168,140
  202,224
  238,728
  277,100
  316,802
  357,289
  398,074
  438,744
  478,967
  518,503
  557,203
  594,999
  631,900
  667,977
  703,356
  738,202
  772,711
  807,102
  841,604
  876,457
  911,898
  948,167
  985,497
Retained Cash Flow (-), $m
  -393
  -6,917
  -8,200
  -12,381
  -17,987
  -25,294
  -34,569
  -46,065
  -60,004
  -76,574
  -95,924
  -118,148
  -143,328
  -171,483
  -202,605
  -236,664
  -273,607
  -313,371
  -355,888
  -401,087
  -448,906
  -499,288
  -552,190
  -607,582
  -665,453
  -725,804
  -788,659
  -854,055
  -922,048
  -992,713
  -1,066,139
Prev. year cash balance distribution, $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
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
 
  20,122
  25,342
  34,732
  46,132
  59,466
  74,509
  90,895
  108,136
  125,650
  142,804
  158,952
  173,473
  185,806
  195,469
  202,080
  205,360
  205,132
  201,315
  193,912
  182,994
  168,689
  151,166
  130,619
  107,259
  81,297
  52,946
  22,402
  -10,150
  -44,546
  -80,642
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
 
  18,177
  20,482
  24,857
  28,917
  32,267
  34,566
  35,578
  35,212
  33,534
  30,746
  27,148
  23,088
  18,911
  14,914
  11,318
  8,257
  5,784
  3,884
  2,494
  1,527
  887
  486
  249
  117
  49
  17
  4
  -1
  -2
  -1
Current shareholders' claim on cash, %
  100
  40.6
  26.0
  16.7
  10.9
  7.2
  4.8
  3.2
  2.2
  1.5
  1.0
  0.7
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

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 conducts its business with offices across the world, providing it with a global platform for sourcing transactions, raising capital and carrying out capital markets activities. The Company operates through four segments: Private Markets, Public Markets, Capital Markets and Principal Activities. It operates and reports its combined credit and hedge funds businesses through the Public Markets segment. The Capital Markets segment consists primarily of its global capital markets business. Through its Principal Activities segment, the Company manages the firm's assets and deploys capital.

FINANCIAL RATIOS  of  KKR (KKR)

Valuation Ratios
P/E Ratio 27.7
Price to Sales 4.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow -5.5
Price to Free Cash Flow -5.3
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 -216.7%. 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 821.584 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 $15.6 billion.

RELATED COMPANIES Price Int.Val. Rating
FSAM Fifth Street A 3.95 20.98  str.buy
CG Carlyle Group 23.55 149.82  str.buy
BX Blackstone Gro 32.29 105.06  str.buy
OAK Oaktree Capita 45.35 1.27  str.sell
FIG Fortress Inves 7.97 6.66  hold
OZM Och-Ziff Capit 2.88 0.31  str.sell
ARES Ares Managemen 18.30 117.80  str.buy

COMPANY NEWS

▶ Bain Capital's Toys 'R' Us play ends up backfiring with bankruptcy   [05:00PM  American City Business Journals]
▶ [$$] The Four Spokesmen of Private Equity Move On   [Sep-18-17 01:39PM  The Wall Street Journal]
▶ What Led to Blackstones Premium Valuation   [10:39AM  Market Realist]
▶ A Peek at Blackstones Hedge Fund Solutions   [09:11AM  Market Realist]
▶ Insights on Blackstones Credit Division   [Sep-15-17 06:06PM  Market Realist]
▶ [$$] Credit Investor Star Mountain Hires Former KKR Exec as Senior Adviser   [Sep-12-17 01:20PM  The Wall Street Journal]
▶ Burkle to Schwarzman: $3B is not enough for warehouse company   [02:20PM  American City Business Journals]
▶ KKR joins Accel to back cybersecurity startup ForgeRock   [Sep-05-17 12:45PM  American City Business Journals]
▶ Private Briefing: KKR's Healthcare Deal Spree   [Sep-04-17 02:13PM  TheStreet.com]
▶ ValueAct Takes Stake in KKR in 2nd Quarter   [Sep-01-17 12:53PM  GuruFocus.com]
▶ ValueAct ups stake in KKR   [Aug-23-17 02:00PM  American City Business Journals]
▶ [$$] GoDaddy COO Scott Wagner Returning to Chief Executive Post   [Aug-22-17 06:34PM  The Wall Street Journal]
▶ [$$] Vocus Talks With Private-Equity Suitors Break Off   [Aug-21-17 07:25AM  The Wall Street Journal]
▶ [$$] Cooper's Take: KKR's Focus on Health Care Knows No Boundaries   [Aug-18-17 07:30AM  The Wall Street Journal]
▶ Insights on Valuations of Alternative Asset Managers   [Aug-17-17 09:06AM  Market Realist]
▶ Blackstone Beats Carlyle and Apollo on Realizations   [Aug-15-17 05:06PM  Market Realist]
▶ How Apollos Total Assets under Management Compare   [Aug-14-17 09:06AM  Market Realist]
▶ Insights on Apollos Premium Valuation   [07:36AM  Market Realist]
▶ Apollos Dividend to Rise in 2017   [Aug-11-17 10:38AM  Market Realist]
▶ Behind Apollos Real Assets Division   [09:08AM  Market Realist]
▶ Understanding Carlyles Discounted Valuations   [07:36AM  Market Realist]
▶ Carlyles Real Estate Division in 2H17   [07:37AM  Market Realist]
▶ KKR's Each-Way Bet on Aussie Housing   [12:15AM  Bloomberg]
▶ Why Carlyles Credit Division Saw a Fall in 2Q17   [Aug-09-17 05:05PM  Market Realist]
▶ Behind Carlyle Groups Rising ENI   [01:48PM  Market Realist]
▶ [$$] KKR-Backed Air Medical to Acquire Envision Healthcare Subsidiary   [Aug-08-17 12:35PM  The Wall Street Journal]
▶ [$$] KKR Buying Covenant Surgical Partners   [10:15AM  The Wall Street Journal]
▶ KKR To Acquire Covenant Surgical Partners   [07:00AM  Business Wire]
▶ Ares Capital Corporation Missed Analysts Estimates in 2Q17   [Aug-07-17 04:55PM  Market Realist]
▶ Do KKRs Lower Valuations Present a Buying Opportunity?   [Aug-04-17 10:36AM  Market Realist]
▶ KKRs Dividends to Increase Marginally in 2017   [09:09AM  Market Realist]
▶ Insights on KKRs Capital Market Segment   [07:36AM  Market Realist]
▶ Behind KKRs Public Market Division   [Aug-03-17 04:35PM  Market Realist]
▶ KKRs Private Equity Divisions Deployments   [03:05PM  Market Realist]
▶ KKR Releases 2016 ESG and Citizenship Update   [07:00AM  Business Wire]
▶ [$$] Investors Pile Into Private Equity at Greatest Clip Since 2013   [Aug-02-17 06:22PM  The Wall Street Journal]
Financial statements 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.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.