What is AINV's Intrinsic value?

Apollo Investment Corp (AINV) Intrinsic Value Analysis

Executive Summary

As of June 18, 2025, Apollo Investment Corp's estimated intrinsic value ranges from $4.52 to $5.73 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $5.73 -58.0%
Dividend Discount Model (Stable) $4.52 -66.9%

Is Apollo Investment Corp (AINV) undervalued or overvalued?

With the current market price at $13.65, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Apollo Investment Corp's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 4.2% 4.7%
Equity market risk premium 5.0% 6.0%
Adjusted beta 1.05 1.3
Cost of equity 9.4% 12.9%
Cost of debt 5.0% 5.0%
Tax rate 26.2% 27.0%
Debt/Equity ratio 1.69 1.69
After-tax WACC 5.8% 7.1%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 290.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 11.2%
  • Long-term growth rate: 3.5%
  • Fair value: $5.73 (-58.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.9% (Low) to 9.4% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $2 to $7
  • Selected fair value: $4.52 (-66.9% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $867M
Enterprise Value $2300M
Trailing P/E 37.80
Forward P/E 37.42
Trailing EV/EBITDA 0.00
Current Dividend Yield 769.55%
Dividend Growth Rate (5Y) -20.56%
Debt-to-Equity Ratio 1.69

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $1.15
Dividend Discount Model (Stable) 43% $0.68
Weighted Average 100% $5.21

Investment Conclusion

Based on our comprehensive valuation analysis, Apollo Investment Corp's weighted average intrinsic value is $5.21, which is approximately 61.8% below the current market price of $13.65.

Key investment considerations:

  • Overall financial health and market position

Given these factors, we believe Apollo Investment Corp is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.