If you are wondering whether Victory Capital Holdings is still reasonably priced after a strong run, this article will walk through what the numbers actually say about its valuation.
The stock last closed at US$69.18, with a 7.9% return year to date, a 10.5% return over the past year, and a very large 3 year gain of about 7x. However, the shares saw an 8.5% decline over the last week and a 1.9% decline over the last month.
Recent moves have come as Victory Capital stays on investors’ radars in the US diversified financials space, where market attention often swings between fee based asset managers and lower cost passive products. News coverage has largely focused on how asset managers are positioned in a competitive industry, which gives some context for the share price pulling back in the short term after strong multi year returns.
On our checklist of six valuation tests, Victory Capital scores a 3 out of 6 value score. Next we will look at how traditional models such as P/E, cash flow based estimates, and peer comparisons stack up, before finishing with a more complete way to think about valuation overall.
The Excess Returns model looks at how much profit a company is expected to earn over and above the return that shareholders require, then converts those excess earnings into a per share value.
For Victory Capital Holdings, the model uses a Book Value of $37.79 per share and a Stable Book Value of $17.33 per share, both based on the median figures from the past 5 years. It assumes Stable EPS of $4.13 per share, sourced from the median Return on Equity, which averages 23.82% over that period.
The required return for shareholders is captured in the Cost of Equity at $1.43 per share. After covering that requirement, the model estimates an Excess Return of $2.70 per share. Aggregating those future excess returns produces an estimated intrinsic value of about $72.95 per share.
Compared with the recent share price of US$69.18, this Excess Returns valuation implies the shares are about 5.2% undervalued. For many long term investors, this falls into a “close enough” valuation range.
Result: ABOUT RIGHT
Victory Capital Holdings is fairly valued according to our Excess Returns, but this can change at a moment’s notice. Track the value in your watchlist or portfolio and be alerted on when to act.
For a profitable company like Victory Capital Holdings, the P/E ratio is a useful shorthand because it ties the share price directly to the earnings that support it. Investors are essentially asking how many dollars they are willing to pay today for each dollar of current earnings.
What counts as a “normal” P/E depends on what the market expects for growth and how risky those earnings look. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually calls for a lower one.
Victory Capital currently trades on a P/E of 16.4x, compared with a Capital Markets industry average of about 22.6x and a peer average of 12.7x. Simply Wall St’s proprietary Fair Ratio for Victory Capital is 18.2x, which reflects factors such as its earnings profile, industry, profit margins, market cap and specific risks.
This Fair Ratio can be more informative than a simple comparison with peers or the broad industry, because it adjusts for the company’s own characteristics rather than assuming all capital markets businesses should trade on the same multiple. With the actual P/E at 16.4x versus a Fair Ratio of 18.2x, the shares appear undervalued on this metric.
Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, which let you set out your own story for Victory Capital Holdings by linking assumptions about future revenue, earnings, margins and fair value to a clear forecast. You can then compare that fair value with the current share price while seeing in real time how the most bearish view at about US$61 and the most bullish view at about US$82 respond when new information such as buybacks, UCITS launches or updated analyst inputs comes through. This allows you to quickly see which story you find more realistic and how that translates into your own buy or sell decisions.
For Victory Capital Holdings however we will make it really easy for you with previews of two leading Victory Capital Holdings Narratives:
Both are built on the same core data, but they make different calls about how buybacks, UCITS expansion, fees, and industry shifts might shape future earnings and valuation. Your job is not to pick one blindly, but to see which set of assumptions feels closer to your own view.
🐂 Victory Capital Holdings Bull Case
Fair value in this bullish narrative: US$78.00 per share
Implied discount to that fair value at the recent US$69.18 price: about 11.3% undervalued
Revenue growth assumption used: 17.13% per year
Sees expense discipline, integration of Amundi and buybacks supporting higher long run earnings and leaving room for a higher future P/E than more cautious models assume.
Builds in strong contributions from ETF growth, UCITS expansion and data driven distribution, with analysts in this camp using revenue growth of 25.2% and higher margins in their detailed assumptions.
Anchors on a US$82 bullish price target and a fair value of US$78, with the view that cost control, international inflows and platform scale can support that outcome if execution stays on track.
🐻 Victory Capital Holdings Bear Case
Fair value in this more cautious narrative: US$69.00 per share
Implied gap to that fair value at the recent US$69.18 price: about 0.3% overvalued
Revenue growth assumption used: 8.85% per year
Assumes the shift to passive products, digital advice and fee pressure weighs on long term inflows and margins, even with ETFs and UCITS helping to diversify revenue.
Emphasises risks around ongoing acquisitions, integration costs, potential dilution and slower ESG progress, which could cap how much investors are willing to pay in future P/E terms.
Uses a fair value of US$69 that sits very close to the recent price, suggesting that if these more conservative growth and margin inputs play out, upside could be limited from here.
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.
