Onex Corporation's Strategic Value and Buyback Momentum in Q2 2025: A Case for Long-Term Outperformance

In the second quarter of 2025, Onex Corporation (ONEX.TO) has demonstrated a compelling case for investors seeking undervalued capital appreciation opportunities. The company's intrinsic value, calculated at $121.23 per fully diluted share as of June 30, 2025, stands in stark contrast to its current market price of $111.91 (as of August 8, 2025). This $9.32 per-share discount—representing a 7.7% gap—offers a rare window for investors to capitalize on a disciplined buyback strategy, robust fee-generating assets, and a track record of compounding returns.

Intrinsic Value vs. Market Price: A Mispricing Opportunity

Onex's intrinsic value is derived from its $8.4 billion in investing capital, which includes private equity and credit investments, carried interest, and cash reserves. The company's investing capital per share has delivered a 15% compound annual return over five years, with a 4% return in Q2 2025 and a 7% return for the first half of the year. Meanwhile, the stock trades at a 23% discount to its 52-week high of $118.91, despite outperforming the S&P/TSX Composite by 3.33% over the past year.

The disconnect between intrinsic value and market price is further amplified by Onex's aggressive buyback program. In Q2 2025, the company repurchased 1.8 million shares at an average cost of $70.66, totaling $129 million. These buybacks, which represent 4% of shares outstanding in the first half of 2025, have been executed at a significant discount to intrinsic value. With $1.5 billion in cash and near-cash reserves, Onex has ample liquidity to continue repurchasing undervalued shares, directly enhancing shareholder equity.

Fee-Generating AUM Growth: A Catalyst for Future Earnings

Onex's fee-generating assets under management (AUM) have surged to $41 billion, driven by 20% and 14% growth in its private equity and credit platforms, respectively. The credit business, in particular, is nearing $30 billion in AUM, with run-rate fee-related earnings of $44 million. This growth is underpinned by 17 CLO transactions priced or extended in 2025, raising $8.3 billion in fee-generating assets.

The company's unrealized carried interest—$346 million as of June 30, 2025—also signals future upside. As private equity and credit investments mature, this carried interest could translate into realized gains, further narrowing the gap between intrinsic value and market price.

Buyback Momentum and Capital Allocation Discipline

Onex's buyback strategy is a testament to its capital allocation discipline. The company's $1.5 billion cash balance (18% of investing capital) provides flexibility to deploy capital into undervalued shares or high-conviction investments. The average buyback price of $70.66 in Q2 2025 is significantly below the intrinsic value of $121.23, creating a margin of safety for long-term investors.

Moreover, Onex's third-quarter dividend of C$0.10 per share (payable October 31, 2025) reinforces its commitment to returning capital to shareholders. While the forward dividend yield of 0.36% is modest, it complements the buyback program by providing a dual mechanism for value creation.

Investment Implications and Strategic Outlook

The current mispricing presents a compelling opportunity for investors with a long-term horizon. Onex's intrinsic value is supported by:
1. Strong operational performance: A 36% year-over-year increase in net income ($229 million) and a 52% jump in EPS ($3.30 in Q2 2025 vs. $2.19 in Q2 2024).
2. Fee-generating AUM growth: AUM expansion in private equity and credit platforms, which drive recurring fee income.
3. Disciplined buybacks: Share repurchases at a 33% discount to intrinsic value, directly boosting per-share value.

Conclusion: A Buy-and-Hold Case for Onex

Onex Corporation's Q2 2025 results underscore its strategic value as a capital-efficient investor. The combination of a wide moat in private equity and credit, disciplined buybacks, and a growing fee-generating AUM base positions the company for long-term outperformance. For investors, the current $111.91 price tag offers a rare chance to acquire shares at a meaningful discount to intrinsic value—a scenario that historically favors patient, value-oriented investors.

As Onex continues to execute its capital return strategy and capitalize on its AUM growth, the market is likely to correct the current mispricing. For those willing to look beyond short-term volatility, Onex represents a compelling addition to a diversified portfolio.