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Should Value Investors Consider Carlyle Group (CG) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put The Carlyle Group LP (CG - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Carlyle Group has a trailing twelve months PE ratio of 10.63, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.99. If we focus on the long-term PE trend, Carlyle Group’s current PE level puts it below its midpoint over the past three years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the Zacks classified Investment Management industry’s trailing twelve months PE ratio, which stands at 14.98. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Carlyle Group has a forward PE ratio (price relative to this year’s earnings) of just 8.90, so it is fair to say that a slightly more value-oriented path may be ahead for Carlyle Group stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Carlyle Group has a P/S ratio of about 0.52. This is significantly lower than the S&P 500 average, which comes in at 3.20 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
As we can see, the stock is trading around its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, Carlyle Group currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Carlyle Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 2.47, which is far better than the industry average of 4.52. The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. Clearly, CG is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Carlyle Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘A’. This gives CG a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mostly encouraging. The current quarter has seen three estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen five upward and zero downward revisions in the same time period.
As a result, the current quarter consensus estimate has risen by 5% in the past two months, while the full year estimate has increased by 26.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Even though Carlyle Group has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
Carlyle Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 38%) should boost investor confidence.
However over the past one year, the Zacks Investment Management industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Carlyle Group.
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Should Value Investors Consider Carlyle Group (CG) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put The Carlyle Group LP (CG - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Carlyle Group has a trailing twelve months PE ratio of 10.63, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.99. If we focus on the long-term PE trend, Carlyle Group’s current PE level puts it below its midpoint over the past three years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Further, the stock’s PE also compares favorably with the Zacks classified Investment Management industry’s trailing twelve months PE ratio, which stands at 14.98. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Carlyle Group has a forward PE ratio (price relative to this year’s earnings) of just 8.90, so it is fair to say that a slightly more value-oriented path may be ahead for Carlyle Group stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Carlyle Group has a P/S ratio of about 0.52. This is significantly lower than the S&P 500 average, which comes in at 3.20 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
As we can see, the stock is trading around its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.
Broad Value Outlook
In aggregate, Carlyle Group currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Carlyle Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 2.47, which is far better than the industry average of 4.52. The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. Clearly, CG is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Carlyle Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘A’. This gives CG a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mostly encouraging. The current quarter has seen three estimates go higher in the past sixty days compared to one lower, while the full year estimate has seen five upward and zero downward revisions in the same time period.
As a result, the current quarter consensus estimate has risen by 5% in the past two months, while the full year estimate has increased by 26.1%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The Carlyle Group L.P. Price and Consensus
The Carlyle Group L.P. Price and Consensus | The Carlyle Group L.P. Quote
Even though Carlyle Group has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
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Bottom Line
Carlyle Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 38%) should boost investor confidence.
However over the past one year, the Zacks Investment Management industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in Carlyle Group.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>