Victory Capital Holdings (VCTR) Valuation: Assessing the Impact of Enhanced Liquidity and Lower Borrowing Costs

Victory Capital Holdings (VCTR) just delivered a significant update for anyone following its stock. The company announced the execution of its sixth amendment to the credit agreement, extending the maturity of its $100 million revolving credit facility to 2030. The company also refinanced $985 million of term loans with lower interest rates. Moves like these are always worth a closer look, as they show management is focused on strengthening liquidity and lowering borrowing costs, which signals an emphasis on long-term flexibility.

This financing update lands as Victory Capital Holdings continues to generate attention with its stock. Over the past year, shares have returned 22%, supported by three-year and five-year total returns that have far outpaced the market average. While last month saw shares pull back, the longer-term story still hints at underlying momentum. Combined with annual revenue growth of 17% and net income growth over 33%, this refinancing could be seen as a solid step in supporting future expansion or stability, even if the market has recently tempered its expectations.

With all these moves boosting the balance sheet and the share price holding its gains over the year, some investors may wonder whether Victory Capital Holdings is setting up for further growth or if the market is already pricing in the company’s improved financial outlook.

Most Popular Narrative: 14% Undervalued

The latest narrative suggests Victory Capital Holdings is trading well below its estimated fair value, making it an intriguing idea for value-focused investors.

Enhanced technology enablement and operational scale, particularly through digital platforms, data-driven sales, and variable cost structures, provide Victory with the operational leverage needed to maintain strong adjusted EBITDA margins (guidance at 49%) and potentially increase earnings as AUM grows.

Want to know what’s fueling these bullish calls? The valuation hinges on a trio of bold forecasts, future profit margins reminiscent of industry titans, and a leap in earnings that could surprise even the optimistic. Curious which assumptions underpin these sky-high expectations? Discover the controversial numbers and see how analysts arrive at this rich price target.

Result: Fair Value of $76.43 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing asset outflows and the challenges of integrating recent acquisitions could threaten Victory’s profitable growth story if these issues are not addressed.

Find out about the key risks to this Victory Capital Holdings narrative.

Another View: SWS DCF Model Says Shares May Be Overvalued

While analysts highlight upside using earnings growth and future margin assumptions, our DCF model offers a different perspective. This suggests Victory Capital’s shares might actually be a bit ahead of themselves. Could optimism be clouding caution?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Victory Capital Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Victory Capital Holdings Narrative

If you see things differently or enjoy digging into the details yourself, you can craft a fresh perspective in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Victory Capital Holdings.

Looking for More Compelling Investment Ideas?

Smart investors never put all their eggs in one basket. Open your horizon to new opportunities with investment themes you might be overlooking. There’s real potential outside your current watchlist.

• Uncover opportunities for impressive yields by checking out dividend stocks with yields > 3% and see which companies are rewarding shareholders with strong, steady payouts.
• Capitalize on the future of healthcare innovation, where AI is revolutionizing diagnostics and patient care. Explore healthcare AI stocks to find leaders at the intersection of tech and medicine.
• Catch the momentum in undervalued stocks boasting solid fundamentals, and potentially position yourself ahead of the market with undervalued stocks based on cash flows.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com