Hook / Thesis
TPG has been active on the M&A front and continues to generate healthy operating cash flow. The firm's Q3 fiscal 2025 results (period ended 09/30/2025) show revenues of $1.223 billion and net income of $199 million, while operating cash flow for the quarter was $492 million. Those are tangible signs the underlying business is producing real cash.
That said, the market has pushed the share price up sharply: the latest trade is $65.41 (last close 66.03) with elevated volume. Using the reported diluted EPS for the latest quarter (diluted EPS $0.20) and a simple annualization, the stock is trading at an unusually high multiple relative to where a sensible private-asset manager should sit. In plain terms: the Jackson Financial-related positives that investors are celebrating are real, but they look largely priced in. My view: downgrade to a tactical short/trim until either forward earnings and cash conversion visibly accelerate or the company announces a disciplined capital-return plan that narrows the valuation gap.
What TPG does and why the market should care
TPG is an alternative asset manager investing across multiple platforms - Capital, Growth, Impact, Real Estate and Market Solutions (and an Angelo Gordon partnership). The business is driven by three fundamentals that matter to equity holders:
- Fee-related revenue growth and re-investment into higher-margin strategies (drives operating leverage).
- Cash conversion from operations (drives optionality to pay dividends, buybacks, or pursue bolt-on M&A).
- Balance-sheet flexibility - debt levels and temporary/ noncontrolling capital that sit alongside parent equity.
Investors should care because TPG is demonstrating all three: quarterly revenues reached $1.223 billion in Q3 FY2025 (period ended 09/30/2025) with operating income of $192 million and net income of $199 million. Most importantly for a manager, net cash flow from operating activities for the period was $492 million - a sizeable cash engine that funds deal-making and distributions to shareholders.
Numbers that matter (from recent filings)
- Q3 FY2025 (period ended 09/30/2025): Revenues $1,223,517,000; Operating income $192,194,000; Net income $199,230,000; Diluted EPS $0.20; Diluted average shares 378,345,947.
- Operating cash flow (continuing): $492,043,000 for the most recent quarter.
- Balance sheet snapshot: Assets $13.020 billion; Liabilities $9.247 billion; Long-term debt $1.792 billion; Equity attributable to parent $1.143 billion; Equity attributable to noncontrolling interest $2.630 billion.
- Dividend cadence: quarterly cash payouts continue. The four most recent declared payments total $1.98 (0.53, 0.41, 0.59, 0.45), implying a run-rate cash distribution of roughly $1.98 per year. At a $65.41 price point that equates to a roughly 3.0% cash yield on a simple trailing-four-quarter basis.
Quick valuation read: the latest quarterly diluted EPS of $0.20 annualizes to about $0.80. At $65.41 that implies a P/E around 82x on this simple annualized metric. That is elevated for an asset manager whose earnings depend heavily on realized gains, fee growth and capital deployment - particularly when the firm carries nearly $1.8 billion of long-term debt and substantial capital represented by noncontrolling interests.
Why the Jackson Financial angle matters - and the data gap
Market chatter has centered on Jackson Financial-related synergies and deal optionality. I don’t have the transaction documents or definitive metrics for that specific deal in the materials I reviewed, so I won’t speculate on purchase price or explicit accretion. What matters from an equity lens is that M&A that meaningfully strengthens fee-bearing assets or accelerates scale can justify multiple expansion.
At the same time, the company’s recent acquisitions and portfolio activity (Peppertree, Sabre Hospitality arm, AvidXchange-related deals listed in company news) show management is deploying capital aggressively. That works if deals are accretive to fee margins and cash generation - not if the firm overpays or fails to integrate. With the share price already reflecting much of the potential upside, the risk/reward is asymmetric from here.
Catalysts (what could move the stock either way)
- Positive catalyst: a clear roadmap showing Jackson or other strategic deals producing immediate fee revenue or announced cost synergies - that would justify a higher multiple.
- Positive catalyst: materially higher realized gains or outsized performance fees reported in upcoming quarterly releases, lifting EPS and cash flow beyond market expectations.
- Negative catalyst: any guidance that shows slower fee growth, missed integration targets for recent acquisitions, or weaker performance fees - this would likely compress the multiple rapidly.
- Dividends and capital return signaling - a shift to a more explicit buyback program (large and sustained) would change the stock’s income story and could support a re-rating.
Actionable trade idea (my recommendation)
Stance: Ratings downgrade to short/trim (tactical). Time horizon: swing to position (4-12 weeks core, allow for longer if catalysts confirm). Risk level: medium-high (strategy involves directional exposure and event risk around earnings & M&A).
Trade setup (size to your risk tolerance):
- Primary trade - Short/Trim into strength: enter on rallies up to $69.50 - $71.00. Prefer staggered entries if price action reverses higher; avoid chasing sharp gaps.
- Initial stop: $72.50 (protects against abrupt re-rating or takeover speculation).
- Targets: first target $58.00 (near recent consolidation and support levels), second target $50.00 (if broader multiple compression or disappointing deal metrics emerge). Consider tightening stops to breakeven after first target is hit.
Alternative for conservative investors: Buy put options that expire 2-4 months out with a strike near $65 to $70 to limit downside risk while retaining asymmetric exposure to a downside move.
Risks and counterarguments
- Risk - Execution on M&A: If the Jackson transaction (or other recent deals) proves highly accretive to fees and cash flows, management could deliver faster EPS growth that justifies current levels. That would hurt a short.
- Risk - Dividend and capital returns: Management could pivot to larger buybacks or special dividends funded by operating cash flow (Q3 op. cash flow $492 million), which could re-rate the stock higher.
- Risk - Market technicals / sector flows: A broader rally in asset managers or private-asset names could lift TPG irrespective of fundamentals, squeezing shorts.
- Risk - Balance sheet resilience: With long-term debt at $1.792 billion against parent equity of $1.143 billion, the company retains funding options via noncontrolling capital; a liquidity event or asset re-pricing in their favor could be a tailwind.
Counterargument to my thesis: One could argue that the market is correctly valuing TPG for the transition from a pure private-equity carry model to a broader fee-bearing business that benefits from scale, recurring fee revenue and higher operating margins over time. If fee-related revenue and realized performance fees continue climbing, what looks expensive today could be reasonable versus future cash flows.
How I’ll be proven wrong
I will change my view if we see any of the following:
- Management publishes clear, quantifiable accretion from the Jackson deal (or other announced M&A) that materially raises FY2026 EPS guidance and is corroborated in subsequent filings.
- Significant and recurring buybacks or special distributions that materially shift the capital-return profile beyond the current quarterly cadence (recent TTM declared dividends sum ~ $1.98).
- Quarterly realized gains and performance fees that drive a sustained step-up in operating margin and free cash flow conversion beyond current quarterly run rates.
Final take
TPG looks like a high-quality alternative manager running solid operations and generating meaningful operating cash flow. The problem for new buyers is valuation - or more precisely, the limited upside left after the market has already priced in the positives. That argues for a downgrade to short/trim on a tactical horizon unless the company produces proof that recent deals will deliver faster-than-expected earnings and cash-flow growth. For risk-tolerant traders, short into strength with a disciplined stop and clearly defined targets offers an asymmetric way to capture a likely multiple reversion if the company’s M&A execution or performance fees fall short of the market’s expectations.
Disclosure: This is not investment advice. Trade size and instrument should match your risk profile and position sizing rules.
Data points referenced come from the company's quarterly filings through 11/04/2025 (Q3 FY2025 results for the period ended 09/30/2025) and public corporate notices of dividends as declared through 11/04/2025.