Intrinsic value of BlackRock - BLK

Previous Close

$427.07

  Intrinsic Value

$1,368

stock screener

  Rating & Target

str. buy

+220%

  Value-price divergence*

-11%

Previous close

$427.07

 
Intrinsic value

$1,368

 
Up/down potential

+220%

 
Rating

str. buy

 
Value-price divergence*

-11%

Our model is not good at valuating stocks of financial companies, such as BLK.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BLK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 69.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -2.16
  7.60
  7.34
  7.11
  6.90
  6.71
  6.54
  6.38
  6.24
  6.12
  6.01
  5.91
  5.82
  5.73
  5.66
  5.59
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
Revenue, $m
  11,155
  12,003
  12,884
  13,799
  14,751
  15,740
  16,769
  17,839
  18,953
  20,112
  21,321
  22,580
  23,893
  25,263
  26,693
  28,187
  29,747
  31,378
  33,083
  34,866
  36,731
  38,684
  40,728
  42,869
  45,111
  47,460
  49,922
  52,502
  55,207
  58,042
  61,015
Variable operating expenses, $m
 
  6,994
  7,411
  7,844
  8,295
  8,763
  9,250
  9,757
  10,284
  10,833
  11,405
  10,689
  11,311
  11,960
  12,637
  13,344
  14,082
  14,854
  15,661
  16,506
  17,389
  18,313
  19,281
  20,294
  21,356
  22,468
  23,633
  24,855
  26,135
  27,477
  28,885
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  6,585
  6,994
  7,411
  7,844
  8,295
  8,763
  9,250
  9,757
  10,284
  10,833
  11,405
  10,689
  11,311
  11,960
  12,637
  13,344
  14,082
  14,854
  15,661
  16,506
  17,389
  18,313
  19,281
  20,294
  21,356
  22,468
  23,633
  24,855
  26,135
  27,477
  28,885
Operating income, $m
  4,570
  5,009
  5,473
  5,955
  6,456
  6,977
  7,519
  8,082
  8,669
  9,279
  9,916
  11,890
  12,582
  13,304
  14,057
  14,843
  15,665
  16,523
  17,421
  18,360
  19,343
  20,371
  21,447
  22,575
  23,756
  24,993
  26,289
  27,647
  29,072
  30,565
  32,130
EBITDA, $m
  4,799
  6,964
  7,475
  8,006
  8,558
  9,132
  9,729
  10,350
  10,996
  11,669
  12,370
  13,101
  13,863
  14,658
  15,487
  16,354
  17,259
  18,205
  19,194
  20,229
  21,312
  22,444
  23,631
  24,873
  26,174
  27,536
  28,965
  30,462
  32,031
  33,676
  35,401
Interest expense (income), $m
  198
  197
  798
  1,404
  2,033
  2,686
  3,366
  4,072
  4,807
  5,572
  6,369
  7,199
  8,064
  8,966
  9,907
  10,890
  11,916
  12,987
  14,107
  15,279
  16,504
  17,785
  19,126
  20,531
  22,001
  23,541
  25,155
  26,846
  28,618
  30,476
  32,424
Earnings before tax, $m
  4,460
  4,812
  4,674
  4,551
  4,423
  4,291
  4,153
  4,010
  3,861
  3,707
  3,546
  4,691
  4,518
  4,337
  4,149
  3,953
  3,749
  3,536
  3,314
  3,082
  2,839
  2,586
  2,321
  2,044
  1,754
  1,451
  1,134
  801
  453
  89
  -293
Tax expense, $m
  1,290
  1,299
  1,262
  1,229
  1,194
  1,158
  1,121
  1,083
  1,043
  1,001
  958
  1,267
  1,220
  1,171
  1,120
  1,067
  1,012
  955
  895
  832
  767
  698
  627
  552
  474
  392
  306
  216
  122
  24
  0
Net income, $m
  3,172
  3,513
  3,412
  3,322
  3,229
  3,132
  3,032
  2,927
  2,819
  2,706
  2,589
  3,425
  3,298
  3,166
  3,029
  2,886
  2,737
  2,581
  2,419
  2,250
  2,073
  1,888
  1,694
  1,492
  1,281
  1,059
  828
  585
  331
  65
  -293

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  6,175
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  220,177
  230,823
  247,765
  265,371
  283,670
  302,692
  322,474
  343,053
  364,472
  386,775
  410,010
  434,227
  459,481
  485,830
  513,332
  542,052
  572,056
  603,415
  636,202
  670,495
  706,375
  743,926
  783,239
  824,406
  867,526
  912,702
  960,040
  1,009,655
  1,061,664
  1,116,192
  1,173,369
Adjusted assets (=assets-cash), $m
  214,002
  230,823
  247,765
  265,371
  283,670
  302,692
  322,474
  343,053
  364,472
  386,775
  410,010
  434,227
  459,481
  485,830
  513,332
  542,052
  572,056
  603,415
  636,202
  670,495
  706,375
  743,926
  783,239
  824,406
  867,526
  912,702
  960,040
  1,009,655
  1,061,664
  1,116,192
  1,173,369
Revenue / Adjusted assets
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
  0.052
Average production assets, $m
  17,938
  19,300
  20,717
  22,189
  23,719
  25,310
  26,964
  28,685
  30,476
  32,341
  34,283
  36,308
  38,420
  40,623
  42,923
  45,324
  47,833
  50,455
  53,197
  56,064
  59,064
  62,204
  65,491
  68,934
  72,539
  76,316
  80,275
  84,423
  88,772
  93,332
  98,112
Working capital, $m
  0
  -1,200
  -1,288
  -1,380
  -1,475
  -1,574
  -1,677
  -1,784
  -1,895
  -2,011
  -2,132
  -2,258
  -2,389
  -2,526
  -2,669
  -2,819
  -2,975
  -3,138
  -3,308
  -3,487
  -3,673
  -3,868
  -4,073
  -4,287
  -4,511
  -4,746
  -4,992
  -5,250
  -5,521
  -5,804
  -6,102
Total debt, $m
  4,915
  19,961
  35,090
  50,813
  67,153
  84,140
  101,805
  120,183
  139,310
  159,226
  179,975
  201,601
  224,153
  247,682
  272,241
  297,888
  324,682
  352,685
  381,964
  412,588
  444,629
  478,162
  513,268
  550,031
  588,537
  628,879
  671,152
  715,458
  761,902
  810,596
  861,654
Total liabilities, $m
  191,079
  206,125
  221,254
  236,977
  253,317
  270,304
  287,969
  306,347
  325,474
  345,390
  366,139
  387,765
  410,317
  433,846
  458,405
  484,052
  510,846
  538,849
  568,128
  598,752
  630,793
  664,326
  699,432
  736,195
  774,701
  815,043
  857,316
  901,622
  948,066
  996,760
  1,047,818
Total equity, $m
  29,098
  24,698
  26,511
  28,395
  30,353
  32,388
  34,505
  36,707
  38,999
  41,385
  43,871
  46,462
  49,165
  51,984
  54,927
  58,000
  61,210
  64,565
  68,074
  71,743
  75,582
  79,600
  83,807
  88,211
  92,825
  97,659
  102,724
  108,033
  113,598
  119,433
  125,550
Total liabilities and equity, $m
  220,177
  230,823
  247,765
  265,372
  283,670
  302,692
  322,474
  343,054
  364,473
  386,775
  410,010
  434,227
  459,482
  485,830
  513,332
  542,052
  572,056
  603,414
  636,202
  670,495
  706,375
  743,926
  783,239
  824,406
  867,526
  912,702
  960,040
  1,009,655
  1,061,664
  1,116,193
  1,173,368
Debt-to-equity ratio
  0.169
  0.810
  1.320
  1.790
  2.210
  2.600
  2.950
  3.270
  3.570
  3.850
  4.100
  4.340
  4.560
  4.760
  4.960
  5.140
  5.300
  5.460
  5.610
  5.750
  5.880
  6.010
  6.120
  6.240
  6.340
  6.440
  6.530
  6.620
  6.710
  6.790
  6.860
Adjusted equity ratio
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,172
  3,513
  3,412
  3,322
  3,229
  3,132
  3,032
  2,927
  2,819
  2,706
  2,589
  3,425
  3,298
  3,166
  3,029
  2,886
  2,737
  2,581
  2,419
  2,250
  2,073
  1,888
  1,694
  1,492
  1,281
  1,059
  828
  585
  331
  65
  -293
Depreciation, amort., depletion, $m
  229
  1,955
  2,002
  2,051
  2,102
  2,155
  2,211
  2,268
  2,328
  2,390
  2,455
  1,210
  1,281
  1,354
  1,431
  1,511
  1,594
  1,682
  1,773
  1,869
  1,969
  2,073
  2,183
  2,298
  2,418
  2,544
  2,676
  2,814
  2,959
  3,111
  3,270
Funds from operations, $m
  1,401
  5,468
  5,415
  5,374
  5,332
  5,288
  5,242
  5,195
  5,146
  5,096
  5,044
  4,635
  4,579
  4,520
  4,460
  4,397
  4,331
  4,263
  4,192
  4,118
  4,041
  3,961
  3,877
  3,790
  3,699
  3,603
  3,503
  3,399
  3,290
  3,176
  2,977
Change in working capital, $m
  -753
  -85
  -88
  -92
  -95
  -99
  -103
  -107
  -111
  -116
  -121
  -126
  -131
  -137
  -143
  -149
  -156
  -163
  -170
  -178
  -187
  -195
  -204
  -214
  -224
  -235
  -246
  -258
  -270
  -284
  -297
Cash from operations, $m
  2,154
  5,553
  5,503
  5,465
  5,427
  5,387
  5,345
  5,302
  5,258
  5,212
  5,164
  4,761
  4,710
  4,657
  4,603
  4,546
  4,487
  4,426
  4,363
  4,297
  4,228
  4,156
  4,082
  4,004
  3,923
  3,838
  3,750
  3,657
  3,560
  3,459
  3,274
Maintenance CAPEX, $m
  0
  -598
  -643
  -691
  -740
  -791
  -844
  -899
  -956
  -1,016
  -1,078
  -1,143
  -1,210
  -1,281
  -1,354
  -1,431
  -1,511
  -1,594
  -1,682
  -1,773
  -1,869
  -1,969
  -2,073
  -2,183
  -2,298
  -2,418
  -2,544
  -2,676
  -2,814
  -2,959
  -3,111
New CAPEX, $m
  -119
  -1,363
  -1,417
  -1,472
  -1,530
  -1,591
  -1,654
  -1,721
  -1,791
  -1,865
  -1,943
  -2,025
  -2,112
  -2,203
  -2,300
  -2,401
  -2,509
  -2,622
  -2,742
  -2,867
  -3,000
  -3,140
  -3,287
  -3,442
  -3,606
  -3,777
  -3,958
  -4,149
  -4,349
  -4,559
  -4,781
Cash from investing activities, $m
  -188
  -1,961
  -2,060
  -2,163
  -2,270
  -2,382
  -2,498
  -2,620
  -2,747
  -2,881
  -3,021
  -3,168
  -3,322
  -3,484
  -3,654
  -3,832
  -4,020
  -4,216
  -4,424
  -4,640
  -4,869
  -5,109
  -5,360
  -5,625
  -5,904
  -6,195
  -6,502
  -6,825
  -7,163
  -7,518
  -7,892
Free cash flow, $m
  1,966
  3,592
  3,443
  3,303
  3,157
  3,005
  2,847
  2,683
  2,511
  2,331
  2,144
  1,593
  1,388
  1,174
  949
  714
  468
  210
  -61
  -344
  -641
  -952
  -1,279
  -1,621
  -1,980
  -2,357
  -2,753
  -3,167
  -3,602
  -4,059
  -4,618
Issuance/(repayment) of debt, $m
  0
  15,046
  15,130
  15,722
  16,340
  16,987
  17,665
  18,377
  19,127
  19,916
  20,749
  21,626
  22,552
  23,529
  24,560
  25,647
  26,794
  28,003
  29,279
  30,624
  32,041
  33,534
  35,106
  36,762
  38,506
  40,342
  42,273
  44,306
  46,444
  48,693
  51,059
Issuance/(repurchase) of shares, $m
  -1,373
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  187
  474
  774
  1,089
  1,420
  1,767
  2,130
  2,512
  2,913
  3,333
  3,774
  4,238
  4,724
  5,234
  5,770
  6,411
Cash from financing (excl. dividends), $m  
  -140
  15,046
  15,130
  15,722
  16,340
  16,987
  17,665
  18,377
  19,127
  19,916
  20,749
  21,626
  22,552
  23,529
  24,560
  25,834
  27,268
  28,777
  30,368
  32,044
  33,808
  35,664
  37,618
  39,675
  41,839
  44,116
  46,511
  49,030
  51,678
  54,463
  57,470
Total cash flow (excl. dividends), $m
  1,553
  18,638
  18,572
  19,025
  19,498
  19,992
  20,512
  21,060
  21,638
  22,248
  22,892
  23,219
  23,940
  24,702
  25,509
  26,548
  27,735
  28,987
  30,308
  31,699
  33,166
  34,712
  36,340
  38,054
  39,859
  41,759
  43,759
  45,862
  48,076
  50,404
  52,852
Retained Cash Flow (-), $m
  -595
  -1,775
  -1,813
  -1,884
  -1,958
  -2,035
  -2,117
  -2,202
  -2,292
  -2,386
  -2,486
  -2,591
  -2,702
  -2,819
  -2,943
  -3,073
  -3,210
  -3,355
  -3,508
  -3,669
  -3,839
  -4,018
  -4,206
  -4,405
  -4,614
  -4,834
  -5,065
  -5,309
  -5,565
  -5,834
  -6,411
Prev. year cash balance distribution, $m
 
  6,175
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  23,038
  16,759
  17,141
  17,540
  17,957
  18,396
  18,858
  19,346
  19,861
  20,406
  20,628
  21,238
  21,883
  22,566
  23,475
  24,525
  25,632
  26,799
  28,030
  29,327
  30,694
  32,133
  33,649
  35,245
  36,925
  38,693
  40,554
  42,511
  44,569
  46,441
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  22,088
  15,343
  14,917
  14,442
  13,919
  13,351
  12,740
  12,092
  11,409
  10,698
  9,796
  9,063
  8,320
  7,576
  6,892
  6,232
  5,577
  4,935
  4,316
  3,727
  3,175
  2,666
  2,205
  1,795
  1,436
  1,129
  870
  658
  487
  350
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.5
  99.0
  98.3
  97.4
  96.4
  95.3
  94.0
  92.7
  91.2
  89.7
  88.1
  86.4
  84.7
  82.9
  81.1

BlackRock, Inc. is a publicly owned investment manager. The firm primarily provides its services to institutional, intermediary, and individual investors including corporate, public, union, and industry pension plans, insurance companies, third-party mutual funds, endowments, public institutions, governments, foundations, charities, sovereign wealth funds, corporations, official institutions, and banks. It also provides global risk management and advisory services. The firm manages separate client-focused equity, fixed income, and balanced portfolios. It also launches and manages open-end and closed-end mutual funds, offshore funds, unit trusts, and alternative investment vehicles including structured funds. The firm launches equity, fixed income, balanced, and real estate mutual funds. It also launches equity, fixed income, balanced, currency, commodity, and multi-asset exchange traded funds. The firm also launches and manages hedge funds. It invests in the public equity, fixed income, real estate, currency, commodity, and alternative markets across the globe. The firm primarily invests in growth and value stocks of small-cap, mid-cap, SMID-cap, large-cap, and multi-cap companies. It also invests in dividend-paying equity securities. The firm invests in investment grade municipal securities, government securities including securities issued or guaranteed by a government or a government agency or instrumentality, corporate bonds, and asset-backed and mortgage-backed securities. It employs fundamental and quantitative analysis with a focus on bottom-up and top-down approach to make its investments. The firm employs liquidity, asset allocation, balanced, real estate, and alternative strategies to make its investments. In real estate sector, it seeks to invest in Poland and Germany. The firm benchmarks the performance of its portfolios against various S&P, Russell, Barclays, MSCI, Citigroup, and Merrill Lynch indices. BlackRock, Inc. was founded in 1988 and is based in New York City with additional offices in Boston, Massachusetts; London, United Kingdom; Brazil; Philadelphia, Pennsylvania; Plainsboro, New Jersey; and San Francisco, California.

FINANCIAL RATIOS  of  BlackRock (BLK)

Valuation Ratios
P/E Ratio 21.7
Price to Sales 6.2
Price to Book 2.4
Price to Tangible Book
Price to Cash Flow 32
Price to Free Cash Flow 33.9
Growth Rates
Sales Growth Rate -2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -46.2%
Cap. Spend. - 3 Yr. Gr. Rate 4.8%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 16.9%
Total Debt to Equity 16.9%
Interest Coverage 24
Management Effectiveness
Return On Assets 1.5%
Ret/ On Assets - 3 Yr. Avg. 1.5%
Return On Total Capital 9.4%
Ret/ On T. Cap. - 3 Yr. Avg. 9.5%
Return On Equity 11%
Return On Equity - 3 Yr. Avg. 11.7%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 89%
Gross Margin - 3 Yr. Avg. 89.2%
EBITDA Margin 43.8%
EBITDA Margin - 3 Yr. Avg. 44.5%
Operating Margin 41%
Oper. Margin - 3 Yr. Avg. 40.8%
Pre-Tax Margin 40%
Pre-Tax Margin - 3 Yr. Avg. 40%
Net Profit Margin 28.4%
Net Profit Margin - 3 Yr. Avg. 29.2%
Effective Tax Rate 28.9%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 48.7%

BLK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BLK stock intrinsic value calculation we used $11155 million for the last fiscal year's total revenue generated by BlackRock. The default revenue input number comes from 2016 income statement of BlackRock. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BLK stock valuation model: a) initial revenue growth rate of 7.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BLK is calculated based on our internal credit rating of BlackRock, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of BlackRock.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BLK stock the variable cost ratio is equal to 59.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BLK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4% for BlackRock.

Corporate tax rate of 27% is the nominal tax rate for BlackRock. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BLK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BLK are equal to 160.8%.

Life of production assets of 135.6 years is the average useful life of capital assets used in BlackRock operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BLK is equal to -10%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $29098 million for BlackRock - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 161.635 million for BlackRock is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of BlackRock at the current share price and the inputted number of shares is $69.0 billion.

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Stock chart of BLK Financial statements of BLK
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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