Option FanaticOptions, stock, futures, and system trading, backtesting, money management, and much more!

BLK Stock Study (4-19-23)

I recently did a stock study on Blackrock, Inc. (BLK) with a closing price of $694.03.

Value Line writes:

     > BlackRock, Inc., one of the world’s largest publicly traded
     > investment management firms, manages assets on behalf of
     > institutions and individuals worldwide through a variety of
     > equity and balanced, fixed income, cash management,
     > alternative investment and advisory products. Also offers
     > investment system, risk management, and financial advisory
     > services. Assets under management: $8.6 trillion as of
     > 12/31/22. Acquired Barclays Global Investors in ’09.

This large-size company has grown sales and EPS at annualized rates of 7.3% and 9.2%, respectively, over the last decade. Lines are mostly up, straight, and parallel with the exception of sales/EPS dips in ’16 and ’22 and an additional EPS dip in ’18 (probably due to TCJA). PTPM leads peer and industry averages despite trending somewhat lower from 39.0% in ’13 to 35.2% in ’22 with a last-5-year average of 39.1%.

ROE slightly trails industry and peer averages despite trending higher from 10.9% in ’13 to 13.7% in ’22 with a last-5-year average of 14.0%. Debt-to-Capital has been much lower than peer and industry averages with a last-5-year average of 16.3%.

BLK’s financial health looks very strong. Current and Quick Ratios exceed 13.0 and 7.5, respectively, and Interest Coverage exceeds 30.0. Value Line rates the company A+ for Financial Strength and M* gives an Exemplary rating for Capital Allocation.

I forecast 5% long-term annualized sales growth based on the following:

I am forecasting conservatively.

I forecast 6% long-term annualized EPS growth based on the following:

I am forecasting below the long-term-estimate range (mean of six: 8.9%).

My Forecast High P/E is 18. Over the last 10 years, high P/E has ranged from 17.3 (’17) to 27.3 (’22) with a last-5-year average of 23.2. I am forecasting near the bottom of the range [only ’17 and ’19 (17.9) are lower].

My Forecast Low P/E is 12. Over the last 10 years, low P/E has ranged from 10.2 (’20) to 17.6 (’21) with a last-5-year average of 13.9. I am forecasting near the bottom of the range (only ’20 is lower).

My Low Stock Price Forecast (LSPF) is the default value of $386.20. This is 44.4% less than the previous close and 23.2% less than the 52-week low.

Over the last 10 years, Payout Ratio has ranged from 33.2% in ’17 to 57.5% in ’22 with a last-5-year average of 47.7%. I am forecasting conservatively at 33%.

These inputs land BLK in the SELL zone with an U/D ratio of 0.2. Total Annualized Return (TAR) is 3.9%.

PAR (using Forecast Average—not High—P/E) is 0.7%. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead. Even that, though, is far less than I seek for a large-size company.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 149 studies done in the past 90 days (54 total outliers including my own excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 7.0%, 7.7%, 20.7, 13.4, and 43.1%. I am lower across the board. Value Line projects a future average annual P/E of 18.0, which is higher than MS (17.1) and higher than me (15.0). MOS in the current study seems robust.

With regard to other data, MS high and low EPS are $49.22/share and $33.34/share compared to my $43.07 and $32.18. My high EPS is lower due to a lower forecast growth rate. MS LSPF is $450.20 (16.6% higher than mine). This is consistent with the default $33.34 * 13.4 = $446.75, which is exactly what I like to see.

I would look to re-evaluate this stock under $483/share.

No comments posted.

Leave a Reply

Your email address will not be published. Required fields are marked *