Last Update 05 Dec 25
Fair value Increased 0.32%CVC: Index Inclusion And Higher Margins Will Drive Future Upside Potential
Analysts have modestly raised their price target on CVC Capital Partners, citing expectations for stronger revenue growth and higher profit margins that more than offset a slightly lower future P/E multiple. This has resulted in an updated fair value estimate of approximately €19.28, up from about €19.22.
What's in the News
- CVC is among global private equity suitors in talks to acquire a controlling stake in Indian software services firm ValueLabs in a potential $1 billion deal, with Goldman Sachs advising the promoters on the sale (The Economic Times)
- CVC has exited the auction for Australian non bank lender La Trobe Financial despite the lifting of some ASIC trading restrictions. This leaves Warburg Pincus as the remaining major bidder and casts doubt on a competitive sale process (The Australian)
- CVC is considering acquiring a stake in Indian investment bank Avendus Capital after Mizuho Financial Group fell out of the running, with KKR currently holding a 63 percent controlling stake in the firm
- Nine months after selling a controlling stake in HealthCare Global Enterprises to KKR, CVC is planning a block deal to fully exit its remaining stake, with Ambit Capital advising on the transaction
- CVC Capital Partners plc has been added as a constituent to the Amsterdam AEX Index
Valuation Changes
- The fair value estimate has risen slightly from approximately €19.22 to around €19.28 per share.
- The discount rate has fallen marginally from about 7.54 percent to roughly 7.51 percent, reflecting a slightly lower required return.
- Revenue growth has increased modestly from around 8.64 percent to approximately 9.10 percent in the updated outlook.
- The net profit margin has risen meaningfully from about 49.62 percent to roughly 53.19 percent, indicating expectations for improved profitability.
- The future P/E multiple has declined from about 22.56x to roughly 20.82x, suggesting a slightly more conservative valuation multiple despite stronger fundamentals.
Key Takeaways
- Robust fundraising and strategic expansion into Private Wealth and insurance positions the company for long-term revenue growth and diversified fee income.
- Strategic acquisitions and investments in growth areas like AI and infrastructure could enhance revenue, operational efficiency, and margin expansion.
- Economic uncertainties, geopolitical risks, longer fundraising timelines, and currency fluctuations pose challenges to CVC Capital Partners' earnings stability and revenue growth.
Catalysts
About CVC Capital Partners- A private equity and venture capital firm specializing in middle market secondaries, infrastructure and credit, management buyouts, leveraged buyouts, growth equity, mature, recapitalizations, strip sales, and spinouts.
- The activation of Europe/Americas Fund IX and Asia VI, as well as strong fundraising efforts, suggest robust fee-generating potential in the near future, expected to boost management fee revenues and predictable earnings.
- Strategic expansion into Private Wealth and insurance, with initiatives like CVC-CRED and CVC-PE, highlights a focus on long-term revenue growth and diversification of fee income sources.
- Record levels of deployment across private equity and credit sectors, facilitated by the CVC Network's global reach, position the company to capitalize on market opportunities, potentially enhancing revenue and investment returns.
- Continued investment in growth areas such as Private Wealth, insurance, and AI could lead to operational efficiencies and new revenue streams, supporting margin expansion over time.
- Recent strategic acquisitions and fund launches in infrastructure and secondaries indicate scaling efforts that could lead to significant long-term revenue growth and enhanced EBITDA margins.
CVC Capital Partners Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming CVC Capital Partners's revenue will grow by 12.0% annually over the next 3 years.
- Analysts assume that profit margins will increase from 14.4% today to 52.4% in 3 years time.
- Analysts expect earnings to reach €1.1 billion (and earnings per share of €1.02) by about September 2028, up from €225.3 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €1.3 billion in earnings, and the most bearish expecting €842 million.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.6x on those 2028 earnings, down from 79.8x today. This future PE is greater than the current PE for the NL Capital Markets industry at 16.1x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.32%, as per the Simply Wall St company report.
CVC Capital Partners Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Economic uncertainty and inconsistent activity levels may impact realizations and consequently affect net margins and earnings stability.
- Despite successful fundraising, longer timelines and back-ended processes for future fundraising could pose a risk to predictable revenue streams.
- Concentration in Europe, while offering growth potential, also poses geopolitical risks that might affect long-term revenues and earnings stability.
- Challenges in exiting investments due to subdued strategic buyer and IPO markets could result in lower near-term profit realizations and affect overall earnings.
- Risks associated with currency fluctuations, particularly affecting Asian funds' performance, might challenge the revenue growth and net margins.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of €19.769 for CVC Capital Partners 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 €22.0, and the most bearish reporting a price target of just €17.2.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €2.2 billion, earnings will come to €1.1 billion, and it would be trading on a PE ratio of 22.6x, assuming you use a discount rate of 7.3%.
- Given the current share price of €16.92, the analyst price target of €19.77 is 14.4% 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.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.