Blackstone Inc. (BX)

Equity
US
Financial Services

RISK

RETURN

Key risk factors

Good trading liquidity

Limited default risk

Average price volatility

Key return factors

Greatly overvalued vs peers

Good growth

Decent dividends

Company profileBlackstone Inc. is an alternative asset management firm specializing in real estate, private equity, hedge fund solutions, credit, secondary funds of funds, public debt and equity and multi-asset class strategies. The firm typically invests in early-stage companies. It also provide capital markets services. The real estate segment specializes in opportunistic, core+ investments as well as debt investment opportunities collateralized by commercial real estate, and stabilized income-oriented commercial real estate across North America, Europe and Asia. The firm's corporate private equity business pursues transactions throughout the world across a variety of transaction types, including large buyouts,special situations, distressed mortgage loans, mid-cap buyouts, buy and build platforms, which involves multiple acquisitions behind a single management team and platform, and growth equity/development projects involving significant majority stakes in portfolio companies and minority investments in operating companies, shipping, real estate, corporate or consumer loans, and alternative energy greenfield development projects in energy and power, property, dislocated markets, shipping opportunities, financial institution breakups, re-insurance, and improving freight mobility, financial services, healthcare, life sciences, enterprise tech and consumer, as well as consumer technologies. The firm considers investment in Asia and Latin America. It has a three year investment period. Its hedge fund business manages a broad range of commingled and customized fund solutions and its credit business focuses on loans, and securities of non-investment grade companies spread across the capital structure including senior debt, subordinated debt, preferred stock and common equity. Blackstone Inc. was founded in 1985 and is headquartered in New York, New York with additional offices across Asia, Europe and North America.

Valuation: Greatly overvalued

Multiple

TTM

NTM

P/E

43.60

23.70

PEG

4.90

P/B

13.50

6.00

P/S

16.40

12.30

P/FCF

42.10

42.90

EV/EBITDA

31.30

35.10

From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, and overvalued on P/FCF.

Performance: Mixed

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 6ppts and its growth decelerated by 2ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

Analyst view: Somewhat favourable

The average target price is 126 and suggests 2% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 144.0. This translates into 16% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 109.0. This is equivalent to 12% downside potential in the worst case.

Profitability: Good

RoE

Blackstone Inc. reported a return on equity (RoE) of 31.3% in the last 12 months, up from 19.2% in FY23. The market consensus projects an RoE of 36.1% in FY24, again ahead of its peers.

RoA

Another important profitability metric, return on assets (RoA), amounted to 5.4% in the last 12 months, an increase from 3.4% in FY23. The market analysts predict that RoA will be 5.4% in FY24, again weaker than its peers.

RoCE

In the last 12 months, the return on capital employed (RoCE) grew to 6.0%, below the peers. The consensus estimate for FY24 for RoCE is 13.8%, again behind the peers.

Net margin

EBITDA margin

Historically, BX has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 23.6%, a growth from 18.1% in FY23. The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 55.6% in the last 12 months, up from 44.1% in FY23.

RoIC / WACC = 1.6(good value creation)

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.6 in the past several years. This ratio implies a good shareholder value creation.

Growth: Good

Revenue

EBITDA

EPS

Free cash flow

BX reported revenue of USD 9 115mn in the last 12 months, up 19% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 54% from FY23 to USD 2.84. Market expects EPS to reach USD 4.79105 in FY24.Revenue has been growing steadily in the past several years (positive), while EBITDA has grown very rapidly in recent years (positive). This all contributed to continued EPS growth (positive-to-neutral). At the same time, free cash flow has been growing poorly in recent years. We emphasize the highly volatile dynamics of all key metrics. This is an extremely negative factor.

Dividends: Decent

Dividend paid

Dividend yield

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are somewhat mixed. In the past 12 months, the dividend yield has been good and slightly above its peers. The company distributes most of its profit as dividends (payout ratio above 75%, a negative factor). It will not be easy to sustain such a high payout ratio. It may also indicate a company’s lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.

Default risk: Limited

The risk of default is minimal. We note resilient historical revenue growth, robust profitability, solid return on capital, adequate interest coverage, and solid cash flow generation, among the positive credit factors. Among the negative credit factors, we point to excessive margin volatility.

Volatility: Average

In normal market circumstances, BX is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from moderate to average. We would also like to highlight the average intraday volatility of the instrument. Finally, it may be affected by inherently volatile sector.

Stress-test: Average

In highly turbulent market conditions, BX is moderately volatile. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. At the same time, due to inherently volatile sector, its maximum losses could be moderate.

Selling difficulty: Low

BX boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is relatively stable and remains mildly favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly.

Country risk: Very low

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

Other risks: Negligible

No other major risks have been identified.