• If you are wondering whether Blackstone at around US$124.69 is offering value or just pricing in a lot of expectations, you are asking the right question before making any moves.
• The stock has returned 4.1% over the last 7 days and 11.1% over the last 30 days, set against a year to date return of 21.5% and a 1 year return of 5.1%, with longer term 3 year and 5 year returns of 65.7% and 75.4% respectively.
• Recent coverage around Blackstone has focused on its role as a major alternative asset manager and how investor sentiment towards the sector can influence trading activity in the stock. Broader discussions about interest rates, capital flows into private markets, and the outlook for alternative investments help frame how the market is currently thinking about the company.
• Despite this backdrop, Blackstone holds a valuation score of 1 out of 6. The next sections will walk through traditional valuation approaches and then finish with a way of thinking about value that can give you a more complete picture.

Blackstone scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Blackstone Excess Returns Analysis

The Excess Returns model looks at how efficiently Blackstone converts its equity base into earnings, after accounting for the cost of that equity. In simple terms, it asks whether each dollar of shareholder capital is pulling its weight.

For Blackstone, book value is $10.66 per share and the stable book value estimate is $12.27 per share, based on weighted future book value estimates from 3 analysts. Stable EPS is $5.52 per share, sourced from weighted future return on equity estimates from 7 analysts. Against a cost of equity of $0.98 per share, this points to an excess return of $4.54 per share.

The model incorporates an average return on equity of 45.00% and capitalizes these excess returns on top of the existing equity base to arrive at an estimated intrinsic value of about $114.20 per share.

Compared with the recent share price around $124.69, the Excess Returns model suggests the stock trades about 9.2% above this estimate of intrinsic value, so it is not far from the model’s indication of fair value.

Result: ABOUT RIGHT

Blackstone is fairly valued according to our Excess Returns, but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Blackstone Price vs Earnings

For a profitable company like Blackstone, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. Investors typically accept a higher P/E when they expect stronger earnings growth or see the business as relatively lower risk, and a lower P/E when growth prospects or risks look less favorable.

Blackstone currently trades on a P/E of 32.07x. This sits below the broader Capital Markets industry average P/E of 42.83x, and slightly above the peer group average of 31.16x. Simply Wall St’s Fair Ratio for Blackstone is 24.97x, which is the P/E level its model suggests based on factors such as earnings growth, profit margins, industry, market cap and company specific risks.

This Fair Ratio is more tailored than a simple comparison with peers or the industry because it adjusts for Blackstone’s own characteristics instead of assuming all companies should trade on similar multiples. Comparing the current P/E of 32.07x with the Fair Ratio of 24.97x indicates the stock trades at a richer multiple than the model suggests.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Blackstone Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story to your numbers by linking your view on Blackstone, for example whether you lean closer to a cautious fair value around US$118 or an optimistic view closer to US$203, to explicit assumptions for future revenue, earnings and margins. This turns that story into a financial forecast, a fair value, and a simple comparison between fair value and the current price that updates automatically when fresh news or earnings arrive, all within the Community page where millions of investors share differing perspectives that you can use to decide whether the current price lines up with your own Narrative or not.

For Blackstone however we will make it really easy for you with previews of two leading Blackstone Narratives:

Fair value used in this narrative: US$162.26 per share

Implied discount to this fair value at a US$124.69 share price: about 23.2%

Revenue growth assumption used: 14.07% a year

• Views high inflows and US$177b of undeployed capital as a support for future deals in areas like private credit, real estate and wealth products.
• Leans on analyst assumptions that revenue and margins rise over time, with earnings outcomes tied to how effectively this capital is put to work.
• Sees current pricing as roughly in line with the analyst consensus target, so the key question for you is whether those growth and margin assumptions feel realistic.

Fair value used in this narrative: US$118.00 per share

Implied premium to this fair value at a US$124.69 share price: about 5.7%

Revenue growth assumption used: 15.44% a year

• Focuses on possible pressure from fee headwinds, slower realizations and the risk that very large deployment years are harder to repeat on attractive terms.
• Assumes margins do improve but not as strongly as in more optimistic cases, and that investors eventually pay a lower P/E multiple on those earnings.
• Treats the US$118 fair value as closer to the lower end of analyst targets, so the current price already reflects more optimistic execution than this view allows for.

Do you think there's more to the story for Blackstone? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.