Intrinsic value of BlackRock - BLK

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$384.57

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$384.57

 
Intrinsic value

$788.66

 
Up/down potential

+105%

 
Rating

str. buy

 
Value-price divergence* premium content

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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 62.5

 

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
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  11,155
  11,378
  11,640
  11,939
  12,275
  12,647
  13,055
  13,500
  13,981
  14,500
  15,056
  15,651
  16,287
  16,963
  17,682
  18,444
  19,253
  20,108
  21,013
  21,969
  22,979
  24,044
  25,167
  26,351
  27,599
  28,912
  30,296
  31,752
  33,284
  34,896
  36,592
Variable operating expenses, $m
 
  6,698
  6,822
  6,964
  7,123
  7,299
  7,492
  7,703
  7,931
  8,176
  8,439
  7,409
  7,710
  8,030
  8,371
  8,732
  9,114
  9,519
  9,948
  10,400
  10,878
  11,382
  11,914
  12,475
  13,065
  13,687
  14,342
  15,031
  15,757
  16,520
  17,323
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
  6,698
  6,822
  6,964
  7,123
  7,299
  7,492
  7,703
  7,931
  8,176
  8,439
  7,409
  7,710
  8,030
  8,371
  8,732
  9,114
  9,519
  9,948
  10,400
  10,878
  11,382
  11,914
  12,475
  13,065
  13,687
  14,342
  15,031
  15,757
  16,520
  17,323
Operating income, $m
  4,570
  4,680
  4,818
  4,975
  5,152
  5,348
  5,563
  5,797
  6,051
  6,324
  6,617
  8,242
  8,576
  8,933
  9,311
  9,713
  10,138
  10,589
  11,066
  11,569
  12,101
  12,661
  13,253
  13,876
  14,533
  15,225
  15,954
  16,720
  17,527
  18,376
  19,269
EBITDA, $m
  4,799
  6,602
  6,753
  6,927
  7,122
  7,338
  7,575
  7,833
  8,112
  8,413
  8,736
  9,081
  9,449
  9,842
  10,259
  10,701
  11,170
  11,667
  12,192
  12,747
  13,332
  13,950
  14,602
  15,289
  16,013
  16,775
  17,578
  18,422
  19,311
  20,247
  21,230
Interest expense (income), $m
  198
  197
  369
  549
  755
  985
  1,241
  1,521
  1,827
  2,157
  2,514
  2,896
  3,305
  3,741
  4,206
  4,699
  5,223
  5,779
  6,366
  6,988
  7,645
  8,338
  9,070
  9,841
  10,655
  11,512
  12,414
  13,364
  14,365
  15,417
  16,524
Earnings before tax, $m
  4,460
  4,483
  4,448
  4,426
  4,397
  4,363
  4,322
  4,276
  4,224
  4,166
  4,103
  5,346
  5,272
  5,192
  5,105
  5,013
  4,915
  4,810
  4,699
  4,581
  4,456
  4,323
  4,183
  4,035
  3,879
  3,714
  3,540
  3,356
  3,163
  2,959
  2,745
Tax expense, $m
  1,290
  1,210
  1,201
  1,195
  1,187
  1,178
  1,167
  1,154
  1,140
  1,125
  1,108
  1,443
  1,423
  1,402
  1,378
  1,354
  1,327
  1,299
  1,269
  1,237
  1,203
  1,167
  1,129
  1,089
  1,047
  1,003
  956
  906
  854
  799
  741
Net income, $m
  3,172
  3,273
  3,247
  3,231
  3,210
  3,185
  3,155
  3,121
  3,083
  3,041
  2,995
  3,903
  3,848
  3,790
  3,727
  3,660
  3,588
  3,512
  3,430
  3,344
  3,253
  3,156
  3,054
  2,946
  2,831
  2,711
  2,584
  2,450
  2,309
  2,160
  2,004

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
  218,810
  223,842
  229,595
  236,053
  243,210
  251,062
  259,612
  268,868
  278,839
  289,540
  300,989
  313,204
  326,211
  340,034
  354,702
  370,246
  386,700
  404,100
  422,486
  441,898
  462,381
  483,982
  506,752
  530,742
  556,009
  582,612
  610,613
  640,079
  671,078
  703,683
Adjusted assets (=assets-cash), $m
  214,002
  218,810
  223,842
  229,595
  236,053
  243,210
  251,062
  259,612
  268,868
  278,839
  289,540
  300,989
  313,204
  326,211
  340,034
  354,702
  370,246
  386,700
  404,100
  422,486
  441,898
  462,381
  483,982
  506,752
  530,742
  556,009
  582,612
  610,613
  640,079
  671,078
  703,683
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
  18,296
  18,717
  19,198
  19,738
  20,336
  20,993
  21,708
  22,482
  23,315
  24,210
  25,167
  26,189
  27,276
  28,432
  29,659
  30,958
  32,334
  33,789
  35,327
  36,950
  38,662
  40,469
  42,373
  44,379
  46,491
  48,716
  51,057
  53,521
  56,113
  58,839
Working capital, $m
  0
  -6,303
  -6,448
  -6,614
  -6,800
  -7,006
  -7,233
  -7,479
  -7,746
  -8,033
  -8,341
  -8,671
  -9,023
  -9,397
  -9,796
  -10,218
  -10,666
  -11,140
  -11,641
  -12,171
  -12,730
  -13,320
  -13,943
  -14,599
  -15,290
  -16,018
  -16,784
  -17,591
  -18,439
  -19,332
  -20,272
Total debt, $m
  4,915
  9,233
  13,727
  18,864
  24,632
  31,022
  38,034
  45,670
  53,935
  62,839
  72,395
  82,619
  93,527
  105,142
  117,486
  130,585
  144,466
  159,159
  174,698
  191,116
  208,451
  226,742
  246,032
  266,365
  287,788
  310,352
  334,108
  359,114
  385,426
  413,108
  442,225
Total liabilities, $m
  191,079
  195,397
  199,891
  205,028
  210,796
  217,186
  224,198
  231,834
  240,099
  249,003
  258,559
  268,783
  279,691
  291,306
  303,650
  316,749
  330,630
  345,323
  360,862
  377,280
  394,615
  412,906
  432,196
  452,529
  473,952
  496,516
  520,272
  545,278
  571,590
  599,272
  628,389
Total equity, $m
  29,098
  23,413
  23,951
  24,567
  25,258
  26,023
  26,864
  27,779
  28,769
  29,836
  30,981
  32,206
  33,513
  34,905
  36,384
  37,953
  39,616
  41,377
  43,239
  45,206
  47,283
  49,475
  51,786
  54,222
  56,789
  59,493
  62,339
  65,336
  68,488
  71,805
  75,294
Total liabilities and equity, $m
  220,177
  218,810
  223,842
  229,595
  236,054
  243,209
  251,062
  259,613
  268,868
  278,839
  289,540
  300,989
  313,204
  326,211
  340,034
  354,702
  370,246
  386,700
  404,101
  422,486
  441,898
  462,381
  483,982
  506,751
  530,741
  556,009
  582,611
  610,614
  640,078
  671,077
  703,683
Debt-to-equity ratio
  0.169
  0.390
  0.570
  0.770
  0.980
  1.190
  1.420
  1.640
  1.870
  2.110
  2.340
  2.570
  2.790
  3.010
  3.230
  3.440
  3.650
  3.850
  4.040
  4.230
  4.410
  4.580
  4.750
  4.910
  5.070
  5.220
  5.360
  5.500
  5.630
  5.750
  5.870
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
  3,273
  3,247
  3,231
  3,210
  3,185
  3,155
  3,121
  3,083
  3,041
  2,995
  3,903
  3,848
  3,790
  3,727
  3,660
  3,588
  3,512
  3,430
  3,344
  3,253
  3,156
  3,054
  2,946
  2,831
  2,711
  2,584
  2,450
  2,309
  2,160
  2,004
Depreciation, amort., depletion, $m
  229
  1,922
  1,936
  1,952
  1,970
  1,990
  2,012
  2,035
  2,061
  2,089
  2,119
  839
  873
  909
  948
  989
  1,032
  1,078
  1,126
  1,178
  1,232
  1,289
  1,349
  1,412
  1,479
  1,550
  1,624
  1,702
  1,784
  1,870
  1,961
Funds from operations, $m
  1,401
  5,194
  5,183
  5,183
  5,180
  5,174
  5,167
  5,157
  5,145
  5,130
  5,114
  4,742
  4,721
  4,699
  4,675
  4,648
  4,620
  4,589
  4,557
  4,522
  4,484
  4,445
  4,403
  4,358
  4,311
  4,261
  4,208
  4,152
  4,093
  4,031
  3,965
Change in working capital, $m
  -753
  -124
  -145
  -166
  -186
  -206
  -226
  -246
  -267
  -287
  -308
  -330
  -352
  -375
  -398
  -423
  -448
  -474
  -501
  -530
  -559
  -590
  -622
  -656
  -691
  -728
  -766
  -807
  -849
  -893
  -939
Cash from operations, $m
  2,154
  5,303
  5,328
  5,349
  5,366
  5,381
  5,393
  5,403
  5,411
  5,418
  5,422
  5,071
  5,073
  5,074
  5,073
  5,071
  5,068
  5,063
  5,058
  5,051
  5,044
  5,035
  5,025
  5,014
  5,002
  4,989
  4,974
  4,959
  4,942
  4,924
  4,904
Maintenance CAPEX, $m
  0
  -598
  -610
  -624
  -640
  -658
  -678
  -700
  -724
  -749
  -777
  -807
  -839
  -873
  -909
  -948
  -989
  -1,032
  -1,078
  -1,126
  -1,178
  -1,232
  -1,289
  -1,349
  -1,412
  -1,479
  -1,550
  -1,624
  -1,702
  -1,784
  -1,870
New CAPEX, $m
  -119
  -358
  -421
  -481
  -540
  -598
  -657
  -715
  -774
  -834
  -895
  -957
  -1,021
  -1,088
  -1,156
  -1,226
  -1,300
  -1,376
  -1,455
  -1,537
  -1,623
  -1,713
  -1,806
  -1,904
  -2,006
  -2,113
  -2,224
  -2,341
  -2,464
  -2,592
  -2,726
Cash from investing activities, $m
  -188
  -956
  -1,031
  -1,105
  -1,180
  -1,256
  -1,335
  -1,415
  -1,498
  -1,583
  -1,672
  -1,764
  -1,860
  -1,961
  -2,065
  -2,174
  -2,289
  -2,408
  -2,533
  -2,663
  -2,801
  -2,945
  -3,095
  -3,253
  -3,418
  -3,592
  -3,774
  -3,965
  -4,166
  -4,376
  -4,596
Free cash flow, $m
  1,966
  4,346
  4,297
  4,244
  4,186
  4,124
  4,058
  3,988
  3,914
  3,834
  3,750
  3,307
  3,213
  3,113
  3,008
  2,897
  2,779
  2,656
  2,525
  2,388
  2,243
  2,091
  1,930
  1,761
  1,583
  1,397
  1,200
  993
  776
  548
  307
Issuance/(repayment) of debt, $m
  0
  4,318
  4,494
  5,137
  5,767
  6,391
  7,012
  7,635
  8,265
  8,904
  9,556
  10,223
  10,909
  11,615
  12,344
  13,099
  13,881
  14,693
  15,538
  16,418
  17,335
  18,291
  19,290
  20,333
  21,423
  22,563
  23,756
  25,005
  26,313
  27,682
  29,117
Issuance/(repurchase) of shares, $m
  -1,373
  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 from financing (excl. dividends), $m  
  -140
  4,318
  4,494
  5,137
  5,767
  6,391
  7,012
  7,635
  8,265
  8,904
  9,556
  10,223
  10,909
  11,615
  12,344
  13,099
  13,881
  14,693
  15,538
  16,418
  17,335
  18,291
  19,290
  20,333
  21,423
  22,563
  23,756
  25,005
  26,313
  27,682
  29,117
Total cash flow (excl. dividends), $m
  1,553
  8,664
  8,791
  9,381
  9,953
  10,515
  11,070
  11,624
  12,179
  12,739
  13,306
  13,531
  14,122
  14,728
  15,352
  15,995
  16,660
  17,349
  18,064
  18,806
  19,578
  20,382
  21,220
  22,094
  23,007
  23,960
  24,956
  25,998
  27,089
  28,230
  29,424
Retained Cash Flow (-), $m
  -595
  -490
  -538
  -616
  -691
  -766
  -840
  -915
  -990
  -1,067
  -1,145
  -1,225
  -1,307
  -1,392
  -1,479
  -1,569
  -1,663
  -1,761
  -1,862
  -1,967
  -2,077
  -2,192
  -2,311
  -2,436
  -2,567
  -2,704
  -2,847
  -2,996
  -3,153
  -3,317
  -3,489
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
 
  14,350
  8,253
  8,765
  9,262
  9,749
  10,230
  10,709
  11,189
  11,672
  12,161
  12,306
  12,815
  13,336
  13,873
  14,426
  14,997
  15,589
  16,202
  16,839
  17,501
  18,190
  18,909
  19,658
  20,440
  21,256
  22,110
  23,002
  23,936
  24,913
  25,935
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
 
  13,758
  7,555
  7,628
  7,627
  7,557
  7,425
  7,235
  6,993
  6,705
  6,376
  5,844
  5,468
  5,071
  4,657
  4,235
  3,811
  3,392
  2,984
  2,593
  2,224
  1,881
  1,569
  1,288
  1,041
  827
  645
  494
  370
  272
  195
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
  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
  100.0
  100.0

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 19.6
Price to Sales 5.6
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 28.8
Price to Free Cash Flow 30.5
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 2% 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 -55.4%. 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 162.447 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 $62.5 billion.


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COMPANY NEWS

▶ [$$] A surprising definition of board independence   [Apr-30-17 12:10AM  Financial Times]
▶ Fink: BlackRock Continues to Evolve   [Apr-28-17 03:25PM  Morningstar]
▶ 9 Partners for the Next Decade   [04:00PM  Morningstar]
▶ Legg Mason: "Positive But Volatile"   [12:39PM  Barrons.com]
▶ Cameron Watt Says Draghi Is Marking Time   [10:27AM  Bloomberg Video]
▶ Morningstar Packs Conference Lineup For Financial Advisors   [Apr-25-17 02:41PM  Investor's Business Daily]
▶ Heres what happened when HCI Groups biggest shareholder bought more stock   [Apr-24-17 03:10PM  American City Business Journals]
▶ Retail Flows Continue to Weaken for BlackRocks Offerings   [Apr-21-17 05:35PM  Market Realist]
▶ World's Biggest Money Manager Could Get Even Bigger   [02:21PM  The Wall Street Journal]
▶ Play the ETF Boom: There's an ETF for That   [11:00AM  Investopedia]
▶ ETFs with exposure to BlackRock, Inc. : April 20, 2017   [Apr-20-17 02:14PM  Capital Cube]
▶ OIL GETS SMOKED: Here's what you need to know   [04:00PM  Business Insider]
▶ [$$] BlackRock Managed Assets Continue to Rise   [02:01PM  The Wall Street Journal]
▶ Story Stocks from Briefing.com   [12:06PM  Briefing.com]
▶ BlackRock is Down, but it's Not Out   [12:02PM  Barrons.com]
▶ BlackRock earnings beats Street   [08:10AM  CNBC Videos]
▶ BlackRock beats 1Q profit forecasts   [06:41AM  Associated Press]
▶ BlackRock's Swan Says India Is a High Growth Market   [Apr-18-17 08:44PM  Bloomberg]
▶ French election too close to call: Pro   [06:36AM  CNBC Videos]
▶ Fund Companies Making Layoffs   [07:00AM  Morningstar]
▶ [$$] The week's news in brief: April 17   [Apr-16-17 12:00AM  Financial Times]
▶ Full Show: Bloomberg Daybreak: Americas (04/13)   [Apr-13-17 07:53PM  Bloomberg]
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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