We've been asking ourselves recently if the market has placed a fair valuation on BlackRock. Let's dive into some of the fundamental values of this large-cap Finance company to determine if there might be an opportunity here for value-minded investors.
BlackRock's Valuation Is in Line With Its Sector Averages:
BlackRock, Inc. is a publicly owned investment manager. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 14.34 and an average price to book (P/B) ratio of 1.57. In contrast, BlackRock has a trailing 12 month P/E ratio of 19.9 and a P/B ratio of 2.66.
BlackRock's PEG ratio is 2.22, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2018-02-28 | 2019-02-28 | 2020-02-28 | 2021-02-25 | 2022-02-25 | 2023-02-24 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $12,491 | $14,198 | $14,539 | $16,205 | $19,374 | $17,873 |
| Interest Income (MM) | -$156 | -$80 | -$106 | -$143 | -$118 | -$60 |
| Operating Margins | 42% | 39% | 38% | 35% | 38% | 36% |
| Net Margins | 40.0% | 30.0% | 31.0% | 30.0% | 30.0% | 28.0% |
| Net Income (MM) | $4,970 | $4,305 | $4,476 | $4,932 | $5,901 | $5,178 |
| Depreciation & Amort. (MM) | -$240 | -$220 | -$296 | -$358 | -$415 | -$418 |
| Earnings Per Share | $30.23 | $26.58 | $28.43 | $31.85 | $38.18 | $33.98 |
| EPS Growth | n/a | -12.07% | 6.96% | 12.03% | 19.87% | -11.0% |
| Diluted Shares (MM) | 164 | 162 | 157 | 155 | 155 | 152 |
| Free Cash Flow (MM) | $3,983 | $3,279 | $3,138 | $3,937 | $5,285 | $5,489 |
| Capital Expenditures (MM) | -$155 | -$204 | -$254 | -$194 | -$341 | -$533 |
| Net Current Assets (MM) | -$4,257 | -$5,948 | -$17,352 | -$15,545 | -$74 | -$866 |
| Long Term Debt (MM) | $5,014 | $6,269 | $4,955 | $7,264 | $7,446 | $6,654 |
BlackRock has strong margins with a stable trend, a pattern of improving cash flows, and low debt levels. However, the firm has EPS growth achieved by reducing the number of outstanding shares. Finally, we note that BlackRock has weak revenue growth and a flat capital expenditure trend and just enough current assets to cover current liabilities.
