Intrinsic value of BlackRock - BLK

Previous Close

$421.62

  Intrinsic Value

$818.73

stock screener

  Rating & Target

str. buy

+94%

  Value-price divergence*

-11%

Previous close

$421.62

 
Intrinsic value

$818.73

 
Up/down potential

+94%

 
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 68.1

 

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
  7,930
  8,176
  8,439
  7,409
  7,709
  8,030
  8,370
  8,731
  9,113
  9,518
  9,947
  10,399
  10,877
  11,381
  11,913
  12,473
  13,064
  13,686
  14,341
  15,030
  15,755
  16,518
  17,321
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
  7,930
  8,176
  8,439
  7,409
  7,709
  8,030
  8,370
  8,731
  9,113
  9,518
  9,947
  10,399
  10,877
  11,381
  11,913
  12,473
  13,064
  13,686
  14,341
  15,030
  15,755
  16,518
  17,321
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
  8,243
  8,577
  8,933
  9,312
  9,714
  10,139
  10,590
  11,066
  11,570
  12,102
  12,662
  13,254
  13,878
  14,535
  15,227
  15,955
  16,722
  17,529
  18,378
  19,271
EBITDA, $m
  4,799
  6,600
  6,752
  6,925
  7,120
  7,336
  7,573
  7,831
  8,110
  8,411
  8,734
  9,079
  9,447
  9,840
  10,257
  10,699
  11,168
  11,664
  12,189
  12,744
  13,329
  13,947
  14,599
  15,286
  16,009
  16,771
  17,574
  18,418
  19,307
  20,242
  21,226
Interest expense (income), $m
  198
  173
  298
  459
  644
  851
  1,080
  1,332
  1,606
  1,902
  2,222
  2,565
  2,932
  3,323
  3,740
  4,183
  4,653
  5,151
  5,678
  6,236
  6,825
  7,447
  8,104
  8,796
  9,526
  10,294
  11,104
  11,957
  12,854
  13,798
  14,792
Earnings before tax, $m
  4,460
  4,507
  4,520
  4,516
  4,508
  4,497
  4,483
  4,466
  4,445
  4,422
  4,395
  5,678
  5,646
  5,610
  5,572
  5,531
  5,486
  5,439
  5,388
  5,334
  5,276
  5,215
  5,150
  5,082
  5,009
  4,932
  4,851
  4,765
  4,675
  4,580
  4,479
Tax expense, $m
  1,290
  1,217
  1,220
  1,219
  1,217
  1,214
  1,210
  1,206
  1,200
  1,194
  1,187
  1,533
  1,524
  1,515
  1,504
  1,493
  1,481
  1,469
  1,455
  1,440
  1,425
  1,408
  1,391
  1,372
  1,352
  1,332
  1,310
  1,287
  1,262
  1,236
  1,209
Net income, $m
  3,172
  3,290
  3,299
  3,297
  3,291
  3,283
  3,273
  3,260
  3,245
  3,228
  3,208
  4,145
  4,121
  4,096
  4,068
  4,037
  4,005
  3,970
  3,933
  3,894
  3,852
  3,807
  3,760
  3,710
  3,657
  3,601
  3,541
  3,479
  3,413
  3,343
  3,270

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
  223,100
  228,231
  234,097
  240,682
  247,979
  255,985
  264,703
  274,140
  284,307
  295,217
  306,890
  319,346
  332,607
  346,701
  361,657
  377,506
  394,282
  412,024
  430,770
  450,563
  471,447
  493,472
  516,688
  541,149
  566,911
  594,036
  622,586
  652,629
  684,236
  717,481
Adjusted assets (=assets-cash), $m
  214,002
  223,100
  228,231
  234,097
  240,682
  247,979
  255,985
  264,703
  274,140
  284,307
  295,217
  306,890
  319,346
  332,607
  346,701
  361,657
  377,506
  394,282
  412,024
  430,770
  450,563
  471,447
  493,472
  516,688
  541,149
  566,911
  594,036
  622,586
  652,629
  684,236
  717,481
Revenue / Adjusted assets
  0.052
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
  0.051
Average production assets, $m
  17,938
  18,239
  18,659
  19,138
  19,676
  20,273
  20,928
  21,640
  22,412
  23,243
  24,135
  25,089
  26,107
  27,192
  28,344
  29,567
  30,862
  32,234
  33,684
  35,217
  36,835
  38,542
  40,343
  42,241
  44,241
  46,347
  48,564
  50,898
  53,354
  55,938
  58,656
Working capital, $m
  0
  -6,360
  -6,507
  -6,674
  -6,862
  -7,070
  -7,298
  -7,546
  -7,815
  -8,105
  -8,416
  -8,749
  -9,104
  -9,482
  -9,884
  -10,310
  -10,762
  -11,241
  -11,746
  -12,281
  -12,845
  -13,440
  -14,068
  -14,730
  -15,428
  -16,162
  -16,935
  -17,749
  -18,606
  -19,507
  -20,455
Total debt, $m
  4,915
  8,516
  13,124
  18,391
  24,304
  30,857
  38,046
  45,875
  54,350
  63,479
  73,277
  83,759
  94,944
  106,853
  119,510
  132,940
  147,172
  162,238
  178,169
  195,003
  212,777
  231,532
  251,310
  272,158
  294,123
  317,258
  341,616
  367,254
  394,233
  422,616
  452,470
Total liabilities, $m
  191,079
  200,344
  204,952
  210,219
  216,132
  222,685
  229,874
  237,703
  246,178
  255,307
  265,105
  275,587
  286,772
  298,681
  311,338
  324,768
  339,000
  354,066
  369,997
  386,831
  404,605
  423,360
  443,138
  463,986
  485,951
  509,086
  533,444
  559,082
  586,061
  614,444
  644,298
Total equity, $m
  29,098
  22,756
  23,280
  23,878
  24,550
  25,294
  26,110
  27,000
  27,962
  28,999
  30,112
  31,303
  32,573
  33,926
  35,364
  36,889
  38,506
  40,217
  42,026
  43,939
  45,957
  48,088
  50,334
  52,702
  55,197
  57,825
  60,592
  63,504
  66,568
  69,792
  73,183
Total liabilities and equity, $m
  220,177
  223,100
  228,232
  234,097
  240,682
  247,979
  255,984
  264,703
  274,140
  284,306
  295,217
  306,890
  319,345
  332,607
  346,702
  361,657
  377,506
  394,283
  412,023
  430,770
  450,562
  471,448
  493,472
  516,688
  541,148
  566,911
  594,036
  622,586
  652,629
  684,236
  717,481
Debt-to-equity ratio
  0.169
  0.370
  0.560
  0.770
  0.990
  1.220
  1.460
  1.700
  1.940
  2.190
  2.430
  2.680
  2.910
  3.150
  3.380
  3.600
  3.820
  4.030
  4.240
  4.440
  4.630
  4.810
  4.990
  5.160
  5.330
  5.490
  5.640
  5.780
  5.920
  6.060
  6.180
Adjusted equity ratio
  0.107
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102
  0.102

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  3,172
  3,290
  3,299
  3,297
  3,291
  3,283
  3,273
  3,260
  3,245
  3,228
  3,208
  4,145
  4,121
  4,096
  4,068
  4,037
  4,005
  3,970
  3,933
  3,894
  3,852
  3,807
  3,760
  3,710
  3,657
  3,601
  3,541
  3,479
  3,413
  3,343
  3,270
Depreciation, amort., depletion, $m
  229
  1,920
  1,934
  1,950
  1,968
  1,988
  2,010
  2,034
  2,059
  2,087
  2,117
  836
  870
  906
  945
  986
  1,029
  1,074
  1,123
  1,174
  1,228
  1,285
  1,345
  1,408
  1,475
  1,545
  1,619
  1,697
  1,778
  1,865
  1,955
Funds from operations, $m
  1,401
  5,211
  5,234
  5,247
  5,259
  5,271
  5,283
  5,294
  5,304
  5,315
  5,325
  4,981
  4,992
  5,002
  5,012
  5,023
  5,034
  5,045
  5,056
  5,068
  5,080
  5,092
  5,105
  5,118
  5,131
  5,145
  5,160
  5,175
  5,191
  5,208
  5,225
Change in working capital, $m
  -753
  -125
  -146
  -167
  -188
  -208
  -228
  -249
  -269
  -290
  -311
  -333
  -355
  -378
  -402
  -426
  -452
  -478
  -506
  -534
  -564
  -595
  -628
  -662
  -697
  -734
  -773
  -814
  -857
  -901
  -948
Cash from operations, $m
  2,154
  5,406
  5,380
  5,414
  5,447
  5,479
  5,511
  5,542
  5,573
  5,605
  5,636
  5,314
  5,347
  5,380
  5,414
  5,449
  5,486
  5,523
  5,562
  5,602
  5,644
  5,687
  5,732
  5,780
  5,829
  5,880
  5,933
  5,989
  6,048
  6,109
  6,173
Maintenance CAPEX, $m
  0
  -596
  -608
  -622
  -638
  -656
  -676
  -698
  -721
  -747
  -775
  -804
  -836
  -870
  -906
  -945
  -986
  -1,029
  -1,074
  -1,123
  -1,174
  -1,228
  -1,285
  -1,345
  -1,408
  -1,475
  -1,545
  -1,619
  -1,697
  -1,778
  -1,865
New CAPEX, $m
  -119
  -357
  -419
  -480
  -538
  -597
  -655
  -713
  -771
  -831
  -892
  -954
  -1,018
  -1,084
  -1,152
  -1,223
  -1,296
  -1,372
  -1,450
  -1,533
  -1,618
  -1,707
  -1,801
  -1,898
  -2,000
  -2,106
  -2,218
  -2,334
  -2,456
  -2,584
  -2,718
Cash from investing activities, $m
  -188
  -953
  -1,027
  -1,102
  -1,176
  -1,253
  -1,331
  -1,411
  -1,492
  -1,578
  -1,667
  -1,758
  -1,854
  -1,954
  -2,058
  -2,168
  -2,282
  -2,401
  -2,524
  -2,656
  -2,792
  -2,935
  -3,086
  -3,243
  -3,408
  -3,581
  -3,763
  -3,953
  -4,153
  -4,362
  -4,583
Free cash flow, $m
  1,966
  4,453
  4,352
  4,313
  4,271
  4,227
  4,181
  4,132
  4,080
  4,026
  3,970
  3,555
  3,492
  3,426
  3,356
  3,282
  3,204
  3,123
  3,037
  2,947
  2,852
  2,752
  2,647
  2,537
  2,421
  2,299
  2,171
  2,036
  1,895
  1,746
  1,590
Issuance/(repayment) of debt, $m
  0
  3,586
  4,608
  5,267
  5,913
  6,552
  7,189
  7,829
  8,474
  9,130
  9,798
  10,482
  11,185
  11,909
  12,656
  13,430
  14,232
  15,065
  15,932
  16,834
  17,774
  18,755
  19,778
  20,848
  21,966
  23,135
  24,358
  25,638
  26,979
  28,383
  29,854
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
  3,586
  4,608
  5,267
  5,913
  6,552
  7,189
  7,829
  8,474
  9,130
  9,798
  10,482
  11,185
  11,909
  12,656
  13,430
  14,232
  15,065
  15,932
  16,834
  17,774
  18,755
  19,778
  20,848
  21,966
  23,135
  24,358
  25,638
  26,979
  28,383
  29,854
Total cash flow (excl. dividends), $m
  1,553
  8,039
  8,960
  9,580
  10,184
  10,779
  11,370
  11,961
  12,555
  13,156
  13,768
  14,037
  14,677
  15,334
  16,012
  16,712
  17,437
  18,188
  18,969
  19,781
  20,626
  21,507
  22,425
  23,385
  24,386
  25,434
  26,529
  27,675
  28,874
  30,129
  31,444
Retained Cash Flow (-), $m
  -595
  -484
  -523
  -598
  -672
  -744
  -817
  -889
  -963
  -1,037
  -1,113
  -1,191
  -1,270
  -1,353
  -1,438
  -1,525
  -1,617
  -1,711
  -1,810
  -1,912
  -2,019
  -2,130
  -2,247
  -2,368
  -2,495
  -2,628
  -2,767
  -2,912
  -3,064
  -3,224
  -3,391
Prev. year cash balance distribution, $m
 
  6,231
  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
 
  13,786
  8,437
  8,982
  9,513
  10,035
  10,553
  11,071
  11,592
  12,119
  12,655
  12,847
  13,407
  13,982
  14,574
  15,187
  15,820
  16,477
  17,159
  17,869
  18,607
  19,376
  20,179
  21,017
  21,892
  22,806
  23,762
  24,762
  25,809
  26,905
  28,053
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
 
  13,217
  7,724
  7,816
  7,833
  7,778
  7,659
  7,480
  7,245
  6,962
  6,634
  6,101
  5,721
  5,316
  4,893
  4,459
  4,020
  3,585
  3,160
  2,751
  2,364
  2,004
  1,674
  1,377
  1,115
  887
  693
  531
  399
  294
  211
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 21.5
Price to Sales 6.1
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 31.6
Price to Free Cash Flow 33.5
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 3.5% 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 160.3%.

Life of production assets of 125.2 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 -55.9%. 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 - $28503 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 $68.1 billion.

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COMPANY NEWS

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▶ Where Does Top Asset Manager BlackRock See Opportunities?   [Jun-15-17 05:18PM  Investor's Business Daily]
▶ The New Face Of Active Investing   [Jun-13-17 09:45AM  Forbes]
▶ Stock With 1,631% Earnings Growth, 5% Dividend Tests Buy Zone   [02:16PM  Investor's Business Daily]
▶ [$$] Goldman Sachs Joins Bond ETF Party   [01:21AM  The Wall Street Journal]
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▶ Safety trades are surging, buy this instead: BlackRock   [Jun-06-17 05:35PM  CNBC Videos]
▶ BlackRock president on concerns for investors   [09:02AM  CBS News Videos]
▶ Whats Behind the Biotech Sectors Rebound   [12:14AM  The Wall Street Journal]
▶ What's Behind the Biotech Sector's Rebound   [Jun-04-17 10:33PM  The Wall Street Journal]
▶ Cheap ETF Demand May Spark Asset Manager M&A Boom   [Jun-02-17 12:56PM  Bloomberg Video]
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Stock chart of BLK Financial statements of BLK Annual reports 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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