TPG stock analysis: Private equity giant with potential catalysts

Private equity companies are firing on all cylinders this year, with most of them beating the S&P 500 index. TPG (NASDAQ: TPG), which went public in 2022, has risen from a record low of $20.96 to $60. It has risen by almost 50% this year, beating the likes of Carlyle, Apollo Global Management, and Brookfield.

TPG is a fast-growing PE company

TPG is a large asset management company that has grown rapidly in the past few years. It has grown both organically and through acquisitions, with the most notable buyout being Angelo Gordon, a specialist in private credit in a deal valued at over $2.7 billion.

The company does its business through five key segments like capital, growth, impact, Angela Gordon, real estate, and market solutions. These divisions had over $71 billion, $26 billion, $19 billion, $59 billion, $18 billion, $18 billion, and $8.9 billion, respectively. 

TPG has expertise in top strategies like leveraged buyouts, growth investing, credit, and real estate. 

Its annual revenues have jumped from over $1.9 billion in 2019 to over $2.7 billion in the trailing twelve months. This growth happened as the assets under management (AUM) rose from $85 billion in 2019 to $222 billion last year. It had $229 billion in assets in the last quarter, with its fee-earning assets being at $137 billion.

Read more: Carlyle Group stock is a bargain with potential catalysts

TPG earnings download

The most recent financial results showed that TPG’s business was growing. Its total revenue rose from $603 million in the second quarter of 2023 to $744 million in the last one. Its half-year revenues rose to over $1.58 billion from the previous $1.24 billion. 

The results also showed that the fee-related earnings (FRE) rose to $201 million from $125 million in the same period last year. 

Additionally, the company continued to boost its balance sheet, with the amount of cash in its balance sheet rising to over $1.1 billion and its investments growing to $6.9 billion. This cash increased after the company raised $1.1 billion through Senior and Subordinated notes.

Analystss believe that TPG’s business will continue doing well in the coming few years. Its revenues for the third quarter are expected to rise by 43% to $460 million followed by $507 million in the next quarter. 

TPG’s annual revenue is expected to grow by 42% to $1.9 billion followed by $2.27 billion in the next financial year. TPG will likely beat these estimates as it has done as a publicly traded company.

Catalysts for the TPG stock

The company has several potential catalysts ahead. First, the recent interest rate cuts will likely lead to more corporate actions, including mergers and acquisitions (M&A) and initial public offerings (IPO), which will benefit PE firms. TPG, which has $14 billion in dry powder, will benefit when these deals rise.

Second, the company’s entry into the private credit industry is a positive thing as demand rises. Analysts believe that demand for privately-arranged debt will keep rising in the coming years. Just recently, Citigroup and Apollo Global teamed up to create a $25 billion private credit fund. 

Third, TPG stock will likely do well now that the American economy has avoided a hard landing that some analysts were expecting. TPG is also a good rewarder of shareholders with a forward yield of 2.90%. 

However, a key risk for investing in TPG is that it is a relatively overvalued company with a trailing P/E ratio of 28 and a forward multiple of 29. Also, the current stock price is higher than the average analyst estimates of $58.

TPG stock price analysis

Turning to the daily chart, we see that the TPG share price has been in a strong bull run since going public. It has remained above the 50-day Exponential Moving Average, meaning that bulls are in control.

TPG’s stock has formed a bullish flag pattern, which is characterised by a long flag pole and a rectangle pattern. In most periods, this is one of the most bullish signs in the market. Therefore, the stock will likely continue rising in the near term, with the next point to watch being at $70. This rebound will be confirmed when the stock rises above the year-to-date high of $60.35.

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