BlackRock Inc Valuation – January 2019 $BLK

Company Profile (excerpt from Reuters): BlackRock, Inc. (BlackRock), incorporated on February 13, 2006, is an investment management company. BlackRock provides a range of investment and risk management services to institutional and retail clients worldwide. Its diverse platform of active (alpha) and index (beta) investment strategies across asset classes enables the Company to tailor investment outcomes and asset allocation solutions for clients. Its product offerings include single- and multi-asset portfolios investing in equities, fixed income, alternatives and money market instruments. The Company’s products are offered directly and through intermediaries in a range of vehicles, including open-end and closed-end mutual funds, iShares exchange-traded funds (ETFs), separate accounts, collective investment funds and other pooled investment vehicles. BlackRock offers its Aladdin investment system, as well as risk management, outsourcing, advisory and technology services, to institutional investors and wealth management intermediaries under the BlackRock Solutions (BRS) name. BRS’ Financial Markets Advisory (FMA) group advises global financial institutions, regulators, and government entities across a range of risk, regulatory, capital markets and strategic services. It also offers Aladdin Portfolio Builder, which provides financial advisors with portfolio construction tools, and Aladdin Risk for Wealth Management, which provides intermediary partners with institutional-quality portfolio construction, modeling and risk analytics capabilities.


Downloadable PDF version of this valuation:

ModernGraham Valuation of BLK – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $62,755,262,079 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.45 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 160.83% Pass
6. Moderate PEmg Ratio PEmg < 20 16.17 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.98 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.45 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.02 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $24.61
MG Growth Estimate 8.03%
MG Value $604.50
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $356.82
MG Value based on 0% Growth $209.17
Market Implied Growth Rate 3.83%
Current Price $397.91
% of Intrinsic Value 65.82%

BlackRock, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor is only concerned with the low current ratio. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $16.03 in 2014 to an estimated $24.61 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.83% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into BlackRock, Inc. revealed the company was trading above its Graham Number of $342.93. The company pays a dividend of $10 per share, for a yield of 2.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.17, which was below the industry average of 18, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-824.96.

BlackRock, Inc. performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$824.96
Graham Number $342.93
PEmg 16.17
Current Ratio 1.45
PB Ratio 1.98
Current Dividend $10.00
Dividend Yield 2.51%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $9,262,000,000
Total Current Liabilities $6,394,000,000
Long-Term Debt $44,000,000
Total Assets $174,862,000,000
Intangible Assets $31,380,000,000
Total Liabilities $142,392,000,000
Shares Outstanding (Diluted Average) 161,378,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $26.45
Dec2017 $30.23
Dec2016 $19.04
Dec2015 $19.79
Dec2014 $19.25
Dec2013 $16.87
Dec2012 $13.79
Dec2011 $12.37
Dec2010 $10.55
Dec2009 $6.11
Dec2008 $5.78
Dec2007 $7.37
Dec2006 $3.87
Dec2005 $3.50
Dec2004 $2.17
Dec2003 $2.36
Dec2002 $2.04
Dec2001 $1.65
Dec2000 $1.35
Dec1999 $1.04
Dec1998 $0.66

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $24.61
Dec2017 $22.80
Dec2016 $18.64
Dec2015 $17.77
Dec2014 $16.03
Dec2013 $13.59
Dec2012 $11.21
Dec2011 $9.42
Dec2010 $7.54
Dec2009 $5.80
Dec2008 $5.28
Dec2007 $4.64
Dec2006 $3.11
Dec2005 $2.60
Dec2004 $2.07
Dec2003 $1.91
Dec2002 $1.57

Recommended Reading:

Other ModernGraham posts about the company

BlackRock Inc Valuation – March 2018 $BLK
10 Undervalued Companies for the Defensive Dividend Stock Investor – January 2017
10 Undervalued Companies for the Defensive Dividend Stock Investor – December 2016
9 Best Stocks For Value Investors This Week – 6/24/16
BlackRock Inc Valuation – June 2016 $BLK

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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