Thinking about what to do with Carlyle Group stock? You are not alone. With the shares closing at $57.55 and up a solid 13.4% year-to-date, it is a name that keeps turning heads, especially among investors weighing fresh opportunities or plotting their next move. While the past month reflected a dip of 14.4%, and some folks might call that a warning sign, it is important not to overlook the impressive 17.9% jump over the past year and a monster 164.3% gain over five years. Clearly, there is more to Carlyle's story than a single rough patch.

Recent headlines offer some context. Market chatter has picked up following Carlyle’s expansion into new alternative asset classes and its high-profile leadership hires, both designed to spark future growth. These strategies have pushed investor optimism higher at times. Periodic concerns about global economic uncertainty have also introduced risk, making the ride a little bumpier. All told, the stock’s moves often reflect how Wall Street weighs long-term growth potential against near-term risks.

So, how does Carlyle stack up on the valuation front? Out of six key metrics used to judge whether a company is undervalued, Carlyle checks the box in four, earning it a valuation score of 4. This is a strong indicator, but numbers alone do not tell the full story. Up next, we will break down the different valuation approaches most investors use. Stick around for an even more insightful way to think about Carlyle’s value.

Why Carlyle Group is lagging behind its peers

The Excess Returns valuation model takes a close look at how much value Carlyle Group creates by earning returns above what shareholders require. In essence, it zeroes in on the company’s ability to deliver profits that outpace its cost of equity, a crucial measure of true economic value beyond just accounting profits.

Based on this approach, Carlyle Group has a Book Value of $16.33 per share and generates a Stable EPS of $3.61 per share, as estimated from five analysts’ projections of future Return on Equity. The company’s Cost of Equity sits at $1.53 per share, so the Excess Return, or the difference between these, stands at a healthy $2.08 per share. For context, the average Return on Equity over recent years is an impressive 22.09%, with the stable book value drawn from a five-year median.

The Excess Returns model estimates Carlyle’s intrinsic value at $49.28 per share. Compared to the recent share price of $57.55, this suggests the stock is trading at a 16.8% premium to its fair value, indicating it is currently overvalued according to this method.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Carlyle Group.

Our Excess Returns analysis suggests Carlyle Group may be overvalued by 16.8%. Find undervalued stocks or create your own screener to find better value opportunities.

The Price-to-Earnings (PE) ratio is one of the most popular ways to value profitable companies because it helps investors understand how much they are paying for each dollar of earnings. For established businesses like Carlyle Group, the PE ratio is particularly insightful as it quickly relates the company’s stock price with its ability to generate bottom-line profits.

Growth expectations and risk play a big role in shaping what is considered a “normal” PE ratio. Fast-growing and less risky companies generally deserve higher PE ratios, while slower-growing or riskier companies typically warrant lower ones.

Right now, Carlyle Group trades at a PE ratio of 16.6x. That is noticeably below the industry average of 25.9x and also below the core peer average of 20.2x. On the surface, this might suggest Carlyle is undervalued. However, industry averages do not always capture company-specific factors such as growth prospects, profitability, or risks.

This is where the Simply Wall St “Fair Ratio” comes in. The Fair Ratio is calculated here as 18.7x and incorporates factors specific to Carlyle Group, including its earnings growth, profit margins, industry, market cap, and risk profile. This makes it a more tailored benchmark than generic peer or industry numbers. In this case, with Carlyle’s actual PE ratio at 16.6x and a Fair Ratio of 18.7x, the stock looks modestly undervalued through this lens.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your own clear, story-based perspective on a company. It connects your views about what is driving Carlyle’s future (such as new business lines, global expansion, or risks from competition) directly to your expectations for its future revenues, earnings, and profit margins, and ultimately to your estimate of fair value.

Unlike focusing on a single number, Narratives help you see the link between your investment thesis and the company’s financial outlook. This approach, available for free on Simply Wall St’s Community page used by millions of investors, allows you to easily set your forecasts and then instantly see how your Narrative’s fair value stacks up against the current share price so you can decide if it is time to buy or sell.

What makes Narratives powerful is that they update automatically as new information arrives, such as earnings reports or company news. This ensures your analysis always reflects the latest facts. For example, one investor might see Carlyle’s expanding partnerships and technology-driven investments driving earnings to justify a fair value as high as $80 per share, while another sees execution risks and regulatory pressures capping the upside and thus sets a more cautious fair value closer to $56. Narratives put you, and your understanding of the company, at the heart of the investment decision.

Do you think there's more to the story for Carlyle Group? Create your own Narrative to let the Community know!

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.

Companies discussed in this article include CG.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com