Acquisitions And 19 New Funds Will Expand Global Reach And Offerings

Key Takeaways

• Strategic acquisitions and fund diversity are expected to drive revenue growth through increased assets under management and expanded geographic reach.
  
• Investments in personnel and a disciplined M&A strategy aim to enhance operational efficiencies and expand margins over time through scale and synergies.
  
• Strategic growth and acquisitions may constrain margin improvements and revenue, with uncertainty and fee expirations posing risks to overall financial performance.

Catalysts

Operates as a multi-asset class private market solutions provider in the alternative asset management industry in the United States.

• Strategic acquisitions, such as the Qualitas Funds acquisition, are expanding P10's geographic reach and product offerings, which is likely to drive revenue growth as these acquisitions contribute additional fee-paying assets under management.
  
• The commitment to more than double their fee-paying AUM over the next five years suggests significant potential for increased revenue, as AUM is directly tied to fee generation.
  
• Ongoing investments in key personnel, especially in distribution, are expected to drive revenue growth and improve operational efficiencies, potentially enhancing net margins over time due to a higher ROI from these human capital investments.
  
• The diversity and expansion of their fund offerings, with 19 funds in the pipeline for 2025, indicates potential for revenue growth as they broaden their client and investor base, increasing opportunities for asset gathering.
  
• Execution of a disciplined and programmatic M&A strategy suggests potential for earnings growth, as economies of scale and integration synergies are realized, possibly leading to expanded margins over time.

P10 Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming P10's revenue will grow by 10.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.3% today to 11.6% in 3 years time.
• Analysts expect earnings to reach $45.8 million (and earnings per share of $0.39) by about March 2028, up from $18.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 44.6x on those 2028 earnings, down from 66.3x today. This future PE is greater than the current PE for the US Capital Markets industry at 19.9x.
• Analysts expect the number of shares outstanding to decline by 1.61% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.71%, as per the Simply Wall St company report.

P10 Future Earnings Per Share Growth

Risks

• There is inherent uncertainty surrounding forward-looking statements, which could lead to actual results differing materially from expectations due to various risks and uncertainties, potentially impacting revenues and net margins.
  
• P10's newer and faster-growing strategies have lower core FRE margins compared to larger and established parts of the business, potentially creating downward pressure on overall earnings.
  
• The acquisition of Qualitas Funds is expected to put modest downward pressure on 2025 margins, affecting net margins despite being factored into guidance.
  
• Investments in human capital and strategic initiatives may drive growth, but they also incur costs that could constrain net margin improvement if returns do not materialize as expected.
  
• P10 faces expected step-downs and expirations in fee-paying assets under management, which can offset new fundraising efforts and impact revenue growth.

Valuation

• The analysts have a consensus price target of $15.571 for P10 based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $21.0, and the most bearish reporting a price target of just $13.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $394.9 million, earnings will come to $45.8 million, and it would be trading on a PE ratio of 44.6x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $11.15, the analyst price target of $15.57 is 28.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.