Blackstone Shares Are Climbing Today - Are They Overvalued?

Blackstone Inc.’s stock price surged to a price of $85.01 Friday. Ending the day with a 5.6% increase, BX shares outperformed the S&P500 and Dow Industrial composite indices by 3.7% and 4.6% respectively, but are still well below their 52 week high of $138.95. Over the last 12 months, Blackstone is down 22.3%, and has underperformed the S&P 500 by 12.4%. Now, the large-cap Financial Services company is 11.01% below its average target price of $95.53 and has an average analyst rating of buy.

Blackstone's trailing 12 month price to earnings (P/E) ratio is 24.1, which is its share price divided by its trailing earnings per share (EPS) of $3.53. The company has a forward P/E ratio of 17.1 based on its forward EPS of $4.98 -- which is an estimate of future earnings provided by management. The P/E ratio tells us how much investors are willing to pay for each dollar of the company's net earnings from its sales operations. By way of comparison, the average P/E ratio of the Financial Services sector is 13.34, but a company's price can remain stable for a long time even if it is over or undervalued.

Another metric for valuing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present value of the company if it were liquidated today (i.e. selling all assets and paying off all debts). Blackstone's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 8.0, so the company's assets may be overvalued compared to the average P/B ratio of the Financial Services sector, which stands at 1.95.

BX's average free cash flow over the last few years is $2,549,598,000.00, which represents the sum of inflows and outflows of cash from all sources, including capital expenses.. This is the pool of liquidity that the company can use to reinvest in its business or pay out to its equity investors in the form of a dividend. Over the last twelve months investors in Blackstone have enjoyed a dividend yield of 6.1%.

Since it has a an inflated P/E ratio, an elevated P/B ratio, a steady stream of positive cash flows, and strong net margins, Blackstone is probably overvalued at current prices. Make sure to complement this brief quantitative review with a qualitative analysis of your own!

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.