Intrinsic Value The Carlyle Group Inc. 4.625% Subordinated Notes due 2061 (CGABL)

• Previous Close: $17.35
• Intrinsic Value: $7.30
• Upside potential: -58%

Stock Valuation Context

Business Model And Market Position

The Carlyle Group Inc. 4.625% Subordinated Notes due 2061 represent a long-term debt instrument issued by Carlyle, a leading global investment firm specializing in private equity, credit, and investment solutions. Carlyle operates across multiple asset classes, leveraging its deep industry expertise to generate returns for institutional and individual investors. The firm’s revenue model is driven by management fees, performance fees, and investment income, with a focus on capital appreciation and yield generation. Carlyle’s market position is reinforced by its extensive global network, proprietary deal flow, and disciplined investment approach, positioning it as a key player in alternative asset management. The subordinated notes reflect Carlyle’s strategic use of debt to optimize its capital structure while maintaining financial flexibility for growth initiatives and shareholder returns.

Revenue Profitability And Efficiency

Carlyle reported revenue of $5.43 billion for FY 2024, with net income of $1.02 billion, reflecting a net margin of approximately 18.8%. Diluted EPS stood at $2.77, indicating robust profitability. Operating cash flow was $1.09 billion, supported by strong fee-related earnings and realized investments. Capital expenditures were modest at $77.7 million, highlighting efficient capital deployment and a focus on high-return activities.

Earnings Power And Capital Efficiency

The firm’s earnings power is underscored by its diversified revenue streams, including management fees and carried interest. Carlyle’s capital efficiency is evident in its ability to generate substantial operating cash flow relative to its capital expenditures. The subordinated notes, with their fixed coupon, provide a stable cost of capital, enhancing Carlyle’s ability to leverage its investment platform for long-term value creation.

Balance Sheet And Financial Health

Carlyle maintains a strong balance sheet with $1.27 billion in cash and equivalents, providing ample liquidity. The absence of total debt, excluding the subordinated notes, indicates a conservative leverage profile. The notes’ subordinated status aligns with Carlyle’s strategic financial management, ensuring senior debt capacity remains available for operational needs and growth opportunities.

Growth Trends And Dividend Policy

Carlyle’s growth is driven by its expanding asset base and performance in private markets. The firm’s dividend policy, with a $1.40 per share payout, reflects its commitment to returning capital to shareholders while retaining sufficient earnings for reinvestment. This balanced approach supports both near-term income and long-term capital appreciation.

Valuation And Market Expectations

The subordinated notes’ 4.625% coupon offers a competitive yield, reflecting Carlyle’s creditworthiness and market conditions. Investors likely value the notes for their long-term stability and Carlyle’s strong track record in asset management, though their subordinated nature implies higher risk relative to senior debt.

Strategic Advantages And Outlook

Carlyle’s strategic advantages include its global scale, diversified investment strategies, and experienced management team. The outlook remains positive, supported by robust demand for alternative assets and Carlyle’s ability to identify and capitalize on high-growth opportunities. The subordinated notes are a testament to the firm’s financial discipline and long-term growth trajectory.

Sources

Company filings, investor presentations