Subdued Growth No Barrier To Apollo Global Management, Inc. (NYSE:APO) With Shares Advancing 25%

Apollo Global Management, Inc. (NYSE:APO) shares have continued their recent momentum with a 25% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 93%.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Apollo Global Management's P/E ratio of 17.8x, since the median price-to-earnings (or "P/E") ratio in the United States is also close to 20x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Recent times have been advantageous for Apollo Global Management as its earnings have been rising faster than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Check out our latest analysis for Apollo Global Management

Keen to find out how analysts think Apollo Global Management's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Growth For Apollo Global Management?

There's an inherent assumption that a company should be matching the market for P/E ratios like Apollo Global Management's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 96% last year. The latest three year period has also seen a 18% overall rise in EPS, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Turning to the outlook, the next year should bring diminished returns, with earnings decreasing 15% as estimated by the analysts watching the company. With the market predicted to deliver 15% growth , that's a disappointing outcome.

In light of this, it's somewhat alarming that Apollo Global Management's P/E sits in line with the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the negative growth outlook.

The Final Word

Apollo Global Management appears to be back in favour with a solid price jump getting its P/E back in line with most other companies. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Apollo Global Management currently trades on a higher than expected P/E for a company whose earnings are forecast to decline. Right now we are uncomfortable with the P/E as the predicted future earnings are unlikely to support a more positive sentiment for long. Unless these conditions improve, it's challenging to accept these prices as being reasonable.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Apollo Global Management with six simple checks on some of these key factors.

If you're unsure about the strength of Apollo Global Management's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.