Apollo Global Management LLC (NYSE:APO), a USD$13.89B large-cap, is a capital market firm operating in an industry, which has recently been facing serious existential threats resulting from potential disintermediation and disruption from new technology. Many banks and capital markets firms, particularly the large, complex institutions, have been simplifying their business and operating models over the last few years, both for economic reasons and to reduce organizational complexity. Financial services analysts are forecasting for the entire industry, a somewhat weaker growth of 7.95% in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. Is the capital markets industry an attractive sector-play right now? Below, I will examine the sector growth prospects, as well as evaluate whether Apollo Global Management is lagging or leading its competitors in the industry. Check out our latest analysis for Apollo Global Management
What’s the catalyst for Apollo Global Management’s sector growth?
The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the past year, the industry delivered growth in the teens, beating the US market growth of 10.81%. Apollo Global Management leads the pack with its impressive earnings growth of over 100% last year. This proven growth may make Apollo Global Management a more expensive stock relative to its peers.
Is Apollo Global Management and the sector relatively cheap?
Capital markets companies are typically trading at a PE of 17x, in-line with the US stock market PE of 20x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 12.81% compared to the market’s 10.44%, potentially illustrative of past tailwinds. On the stock-level, Apollo Global Management is trading at a lower PE ratio of 11x, making it cheaper than the average capital markets stock. In terms of returns, Apollo Global Management generated 65.51% in the past year, which is 52.70% over the capital markets sector.
What this means for you:
Are you a shareholder? Apollo Global Management recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. In addition to this, its PE is below its capital markets peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market isn’t as bullish of the growth going forward. If your investment thesis of the company hasn’t changed, now may be the right time to accumulate more of Apollo Global Management, if you’re not already highly concentrated in the stock.
Are you a potential investor? If Apollo Global Management has been on your watchlist for a while, now may be the best time to enter into the stock. Its industry-beating growth delivered have not been fully accounted for in its shares given its lower PE ratio relative to its peers. But before you make the decision to buy, I recommend you also look at other important fundamentals such as the health of the company, and see whether there is a significant reason why the stock may be trading at a discount in the capital markets sector.
For a deeper dive into Apollo Global Management’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other financial stocks instead? Use our free playform to see my list of over 600 other financial companies trading on the market.