DCF Studio

    KKR · NYQ · Financial Services

    KKR & Co. Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 134.99

    Market price

    USD 98.81

    Implied upside

    +36.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedReported capital expenditure averages just 0.94% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.0%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 26.7x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 134.99+36.6%
    Exit multiple
    USD 179.43+81.6%
    Market price
    USD 98.81

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn11bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 28.8bnUSD 43.2bnUSD 64.8bnUSD 97.2bnUSD 145.9bn+50.0%
    EBITUSD 1.1bnUSD 1.7bnUSD 2.5bnUSD 3.8bnUSD 5.7bn+50.0%
    NOPATUSD 937.7mUSD 1.4bnUSD 2.1bnUSD 3.2bnUSD 4.7bn+50.0%
    Add depreciation & amortisationUSD 0.00USD 0.00USD 0.00USD 0.00USD 0.00-
    Less capital expenditureUSD -288.1mUSD -432.2mUSD -648.3mUSD -972.4mUSD -1.5bn+50.0%
    Less increase in working capitalUSD 1.4bnUSD 2.1bnUSD 3.2bnUSD 4.8bnUSD 7.2bn-50.0%
    Free cashflow to firmUSD 2.1bnUSD 3.1bnUSD 4.7bnUSD 7.0bnUSD 10.5bn+50.0%
    Discount factor0.95250.86420.78400.71130.6454-
    Present valueUSD 2.0bnUSD 2.7bnUSD 3.7bnUSD 5.0bnUSD 6.8bn+36.1%
    Present Value Of The ForecastUSD 20.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.530Reported 1.791, pulled toward 1.0 (Blume)
    Cost of equity13.41%Risk-free + beta x equity risk premium
    Cost of debt5.83%Interest expense / average total debt
    Market capitalisationUSD 91.3bn62.6% of capital
    Total debtUSD 54.5bn37.4% of capital, book value as a proxy
    Tax rate16.3%Effective, capped at statutory
    WACC10.22%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 134.99

    60% of EV

    Forecast FCFF, final year
    USD 10.5bn
    Capex at depreciation, working capital in reinvestment
    USD 4.7bn
    Less reinvestment at g/ROIC (24.5% of NOPAT)
    USD -1.2bn
    Capitalised
    USD 3.6bn
    ROIC (WACC floor)
    10.2%
    Terminal value, undiscounted
    USD 47.6bn
    Terminal value, discounted
    USD 30.7bn
    Enterprise value
    USD 50.8bn
    Less net debt
    USD -78.2bn
    Equity value
    USD 129.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 179.43

    78% of EV

    Terminal value, undiscounted
    USD 113.4bn
    Terminal value, discounted
    USD 73.2bn
    Enterprise value
    USD 93.3bn
    Less net debt
    USD -78.2bn
    Equity value
    USD 171.5bn

    Spread between methods: 28%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.22%147.05147.27147.48147.69147.90
    9.22%140.21140.39140.57140.75140.94
    10.22%134.68134.84134.99135.15135.31
    11.22%130.11130.25130.38130.52130.66
    12.22%126.27126.39126.51126.63126.75

    Outlined: this model. Green text: above today's price of 98.81. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year50.0%20.0%-30.0pp
    EBIT margin3.9%0.5%-3.4pp
    Discount rate10.2%31.9%+21.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.