Intrinsic value of Blackstone Group - BX

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$30.43

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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Previous close

$30.43

 
Intrinsic value

$572.12

 
Up/down potential

+999%

 
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 BX.

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

We calculate the intrinsic value of BX 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 36.4

 

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, %
  10.31
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  5,126
  8,202
  12,671
  18,950
  27,496
  38,793
  53,331
  71,586
  93,996
  120,950
  152,770
  189,706
  231,934
  279,558
  332,619
  391,101
  454,944
  524,058
  598,330
  677,639
  761,868
  850,905
  944,658
  1,043,056
  1,146,054
  1,253,636
  1,365,816
  1,482,643
  1,604,193
  1,730,578
  1,861,939
Variable operating expenses, $m
 
  5,351
  8,173
  12,138
  17,535
  24,668
  33,848
  45,376
  59,527
  76,548
  96,641
  119,793
  146,458
  176,531
  210,037
  246,967
  287,281
  330,924
  377,824
  427,906
  481,093
  537,317
  596,519
  658,653
  723,693
  791,627
  862,465
  936,237
  1,012,992
  1,092,800
  1,175,750
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
  2,929
  5,351
  8,173
  12,138
  17,535
  24,668
  33,848
  45,376
  59,527
  76,548
  96,641
  119,793
  146,458
  176,531
  210,037
  246,967
  287,281
  330,924
  377,824
  427,906
  481,093
  537,317
  596,519
  658,653
  723,693
  791,627
  862,465
  936,237
  1,012,992
  1,092,800
  1,175,750
Operating income, $m
  2,197
  2,851
  4,498
  6,812
  9,961
  14,125
  19,482
  26,210
  34,469
  44,403
  56,129
  69,913
  85,476
  103,027
  122,582
  144,134
  167,663
  193,134
  220,505
  249,734
  280,775
  313,588
  348,140
  384,403
  422,361
  462,009
  503,351
  546,406
  591,201
  637,779
  686,190
EBITDA, $m
  2,280
  3,049
  4,711
  7,046
  10,223
  14,423
  19,829
  26,616
  34,948
  44,970
  56,801
  70,533
  86,234
  103,941
  123,669
  145,413
  169,150
  194,847
  222,461
  251,949
  283,266
  316,370
  351,228
  387,813
  426,108
  466,107
  507,816
  551,253
  596,446
  643,436
  692,277
Interest expense (income), $m
  152
  310
  725
  1,330
  2,180
  3,336
  4,865
  6,833
  9,304
  12,337
  15,985
  20,292
  25,291
  31,006
  37,452
  44,633
  52,548
  61,189
  70,543
  80,595
  91,329
  102,729
  114,780
  127,469
  140,786
  154,727
  169,287
  184,470
  200,282
  216,733
  233,838
Earnings before tax, $m
  2,382
  2,540
  3,773
  5,482
  7,781
  10,788
  14,617
  19,377
  25,165
  32,066
  40,144
  49,622
  60,185
  72,021
  85,130
  99,501
  115,115
  131,945
  149,962
  169,138
  189,445
  210,859
  233,360
  256,934
  281,574
  307,282
  334,064
  361,936
  390,919
  421,046
  452,351
Tax expense, $m
  132
  686
  1,019
  1,480
  2,101
  2,913
  3,947
  5,232
  6,795
  8,658
  10,839
  13,398
  16,250
  19,446
  22,985
  26,865
  31,081
  35,625
  40,490
  45,667
  51,150
  56,932
  63,007
  69,372
  76,025
  82,966
  90,197
  97,723
  105,548
  113,682
  122,135
Net income, $m
  1,039
  1,854
  2,754
  4,002
  5,680
  7,875
  10,670
  14,145
  18,371
  23,408
  29,305
  36,224
  43,935
  52,575
  62,145
  72,636
  84,034
  96,320
  109,472
  123,471
  138,295
  153,927
  170,353
  187,562
  205,549
  224,316
  243,867
  264,213
  285,371
  307,363
  330,216

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,842
  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
  26,403
  37,622
  58,126
  86,927
  126,127
  177,947
  244,637
  328,374
  431,176
  554,819
  700,781
  870,211
  1,063,917
  1,282,377
  1,525,776
  1,794,041
  2,086,901
  2,403,934
  2,744,631
  3,108,437
  3,494,806
  3,903,234
  4,333,294
  4,784,661
  5,257,128
  5,750,622
  6,265,213
  6,801,114
  7,358,686
  7,938,433
  8,541,006
Adjusted assets (=assets-cash), $m
  23,561
  37,622
  58,126
  86,927
  126,127
  177,947
  244,637
  328,374
  431,176
  554,819
  700,781
  870,211
  1,063,917
  1,282,377
  1,525,776
  1,794,041
  2,086,901
  2,403,934
  2,744,631
  3,108,437
  3,494,806
  3,903,234
  4,333,294
  4,784,661
  5,257,128
  5,750,622
  6,265,213
  6,801,114
  7,358,686
  7,938,433
  8,541,006
Revenue / Adjusted assets
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
  0.218
Average production assets, $m
  436
  697
  1,077
  1,611
  2,337
  3,297
  4,533
  6,085
  7,990
  10,281
  12,985
  16,125
  19,714
  23,762
  28,273
  33,244
  38,670
  44,545
  50,858
  57,599
  64,759
  72,327
  80,296
  88,660
  97,415
  106,559
  116,094
  126,025
  136,356
  147,099
  158,265
Working capital, $m
  0
  -4,429
  -6,843
  -10,233
  -14,848
  -20,948
  -28,799
  -38,656
  -50,758
  -65,313
  -82,496
  -102,441
  -125,244
  -150,961
  -179,614
  -211,195
  -245,670
  -282,991
  -323,098
  -365,925
  -411,409
  -459,489
  -510,115
  -563,250
  -618,869
  -676,963
  -737,541
  -800,627
  -866,264
  -934,512
  -1,005,447
Total debt, $m
  8,942
  20,715
  38,000
  62,280
  95,325
  139,010
  195,229
  265,819
  352,481
  456,712
  579,758
  722,588
  885,882
  1,070,044
  1,275,229
  1,501,377
  1,748,257
  2,015,517
  2,302,724
  2,609,413
  2,935,122
  3,279,427
  3,641,967
  4,022,469
  4,420,759
  4,836,775
  5,270,575
  5,722,339
  6,192,372
  6,681,099
  7,189,068
Total liabilities, $m
  19,942
  31,715
  49,000
  73,280
  106,325
  150,010
  206,229
  276,819
  363,481
  467,712
  590,758
  733,588
  896,882
  1,081,044
  1,286,229
  1,512,377
  1,759,257
  2,026,517
  2,313,724
  2,620,413
  2,946,122
  3,290,427
  3,652,967
  4,033,469
  4,431,759
  4,847,775
  5,281,575
  5,733,339
  6,203,372
  6,692,099
  7,200,068
Total equity, $m
  6,461
  5,907
  9,126
  13,648
  19,802
  27,938
  38,408
  51,555
  67,695
  87,107
  110,023
  136,623
  167,035
  201,333
  239,547
  281,664
  327,643
  377,418
  430,907
  488,025
  548,685
  612,808
  680,327
  751,192
  825,369
  902,848
  983,638
  1,067,775
  1,155,314
  1,246,334
  1,340,938
Total liabilities and equity, $m
  26,403
  37,622
  58,126
  86,928
  126,127
  177,948
  244,637
  328,374
  431,176
  554,819
  700,781
  870,211
  1,063,917
  1,282,377
  1,525,776
  1,794,041
  2,086,900
  2,403,935
  2,744,631
  3,108,438
  3,494,807
  3,903,235
  4,333,294
  4,784,661
  5,257,128
  5,750,623
  6,265,213
  6,801,114
  7,358,686
  7,938,433
  8,541,006
Debt-to-equity ratio
  1.384
  3.510
  4.160
  4.560
  4.810
  4.980
  5.080
  5.160
  5.210
  5.240
  5.270
  5.290
  5.300
  5.310
  5.320
  5.330
  5.340
  5.340
  5.340
  5.350
  5.350
  5.350
  5.350
  5.350
  5.360
  5.360
  5.360
  5.360
  5.360
  5.360
  5.360
Adjusted equity ratio
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,039
  1,854
  2,754
  4,002
  5,680
  7,875
  10,670
  14,145
  18,371
  23,408
  29,305
  36,224
  43,935
  52,575
  62,145
  72,636
  84,034
  96,320
  109,472
  123,471
  138,295
  153,927
  170,353
  187,562
  205,549
  224,316
  243,867
  264,213
  285,371
  307,363
  330,216
Depreciation, amort., depletion, $m
  83
  199
  213
  234
  262
  299
  346
  406
  479
  567
  671
  620
  758
  914
  1,087
  1,279
  1,487
  1,713
  1,956
  2,215
  2,491
  2,782
  3,088
  3,410
  3,747
  4,098
  4,465
  4,847
  5,244
  5,658
  6,087
Funds from operations, $m
  -2,053
  2,053
  2,968
  4,236
  5,942
  8,174
  11,017
  14,551
  18,850
  23,975
  29,977
  36,844
  44,693
  53,489
  63,232
  73,915
  85,521
  98,033
  111,429
  125,686
  140,786
  156,709
  173,441
  190,972
  209,296
  228,414
  248,332
  269,060
  290,616
  313,021
  336,303
Change in working capital, $m
  -1,512
  -1,661
  -2,414
  -3,391
  -4,615
  -6,100
  -7,851
  -9,858
  -12,102
  -14,555
  -17,183
  -19,945
  -22,803
  -25,717
  -28,653
  -31,580
  -34,475
  -37,321
  -40,107
  -42,827
  -45,483
  -48,080
  -50,627
  -53,135
  -55,619
  -58,094
  -60,578
  -63,086
  -65,637
  -68,248
  -70,935
Cash from operations, $m
  -541
  3,667
  5,381
  7,626
  10,557
  14,274
  18,867
  24,409
  30,952
  38,531
  47,159
  56,789
  67,496
  79,207
  91,885
  105,495
  119,996
  135,354
  151,535
  168,514
  186,269
  204,789
  224,067
  244,106
  264,915
  286,508
  308,910
  332,146
  356,253
  381,269
  407,238
Maintenance CAPEX, $m
  0
  -17
  -27
  -41
  -62
  -90
  -127
  -174
  -234
  -307
  -395
  -499
  -620
  -758
  -914
  -1,087
  -1,279
  -1,487
  -1,713
  -1,956
  -2,215
  -2,491
  -2,782
  -3,088
  -3,410
  -3,747
  -4,098
  -4,465
  -4,847
  -5,244
  -5,658
New CAPEX, $m
  -22
  -262
  -380
  -534
  -726
  -960
  -1,236
  -1,552
  -1,905
  -2,291
  -2,705
  -3,140
  -3,589
  -4,048
  -4,510
  -4,971
  -5,427
  -5,875
  -6,313
  -6,741
  -7,159
  -7,568
  -7,969
  -8,364
  -8,755
  -9,144
  -9,535
  -9,930
  -10,332
  -10,743
  -11,166
Cash from investing activities, $m
  -29
  -279
  -407
  -575
  -788
  -1,050
  -1,363
  -1,726
  -2,139
  -2,598
  -3,100
  -3,639
  -4,209
  -4,806
  -5,424
  -6,058
  -6,706
  -7,362
  -8,026
  -8,697
  -9,374
  -10,059
  -10,751
  -11,452
  -12,165
  -12,891
  -13,633
  -14,395
  -15,179
  -15,987
  -16,824
Free cash flow, $m
  -570
  3,389
  4,975
  7,051
  9,769
  13,224
  17,505
  22,683
  28,813
  35,932
  44,059
  53,150
  63,287
  74,400
  86,461
  99,436
  113,291
  127,992
  143,509
  159,816
  176,894
  194,730
  213,317
  232,654
  252,750
  273,617
  295,276
  317,751
  341,074
  365,282
  390,415
Issuance/(repayment) of debt, $m
  2,900
  11,848
  17,285
  24,280
  33,046
  43,684
  56,219
  70,591
  86,662
  104,231
  123,046
  142,830
  163,294
  184,162
  205,185
  226,148
  246,881
  267,260
  287,207
  306,689
  325,709
  344,305
  362,541
  380,502
  398,290
  416,016
  433,800
  451,765
  470,033
  488,727
  507,969
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  2,589
  11,848
  17,285
  24,280
  33,046
  43,684
  56,219
  70,591
  86,662
  104,231
  123,046
  142,830
  163,294
  184,162
  205,185
  226,148
  246,881
  267,260
  287,207
  306,689
  325,709
  344,305
  362,541
  380,502
  398,290
  416,016
  433,800
  451,765
  470,033
  488,727
  507,969
Total cash flow (excl. dividends), $m
  2,019
  15,237
  22,259
  31,331
  42,814
  56,909
  73,724
  93,273
  115,475
  140,163
  167,106
  195,980
  226,580
  258,563
  291,646
  325,584
  360,172
  395,252
  430,716
  466,505
  502,603
  539,035
  575,857
  613,156
  651,040
  689,633
  729,076
  769,515
  811,107
  854,009
  898,383
Retained Cash Flow (-), $m
  -191
  -2,213
  -3,219
  -4,522
  -6,154
  -8,136
  -10,470
  -13,147
  -16,140
  -19,412
  -22,916
  -26,601
  -30,412
  -34,298
  -38,214
  -42,118
  -45,979
  -49,774
  -53,489
  -57,118
  -60,660
  -64,123
  -67,519
  -70,865
  -74,177
  -77,479
  -80,791
  -84,136
  -87,539
  -91,020
  -94,604
Prev. year cash balance distribution, $m
 
  2,767
  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
 
  15,792
  19,040
  26,809
  36,660
  48,773
  63,254
  80,126
  99,335
  120,751
  144,190
  169,379
  196,169
  224,264
  253,433
  283,467
  314,193
  345,477
  377,227
  409,388
  441,944
  474,912
  508,338
  542,292
  576,862
  612,155
  648,285
  685,379
  723,568
  762,988
  803,780
Discount rate, %
 
  7.50
  7.88
  8.27
  8.68
  9.12
  9.57
  10.05
  10.55
  11.08
  11.63
  12.22
  12.83
  13.47
  14.14
  14.85
  15.59
  16.37
  17.19
  18.05
  18.95
  19.90
  20.89
  21.94
  23.04
  24.19
  25.40
  26.67
  28.00
  29.40
  30.87
PV of cash for distribution, $m
 
  14,690
  16,362
  21,124
  26,276
  31,530
  36,550
  40,985
  44,517
  46,896
  47,966
  47,668
  46,094
  43,387
  39,775
  35,528
  30,928
  26,244
  21,705
  17,495
  13,738
  10,506
  7,820
  5,661
  3,983
  2,722
  1,804
  1,159
  720
  433
  251
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

The Blackstone Group L.P. is a publicly owned hedge fund sponsor. The firm also provides financial advisory services to its clients. It provides its services to public and corporate pension funds, academic, cultural, and charitable organizations, retirees, sovereign wealth funds, and institutional and individual investors. The firm manages separate client focused portfolios for its clients. It launches fixed income mutual funds. The firm also launches and manages private equity funds, real estate funds, funds of hedge funds, and credit-focused funds for its clients. It invests in private equity, public equity, fixed income, and alternative investment markets. The Blackstone Group L.P. was founded in 1985 and is based in New York, New York with additional offices in London, United Kingdom, Hong Kong, Beijing, China, Dubai, UAE, Dusseldorf, Germany, Los Angeles, Santa Monica, Mexico City, Mexico, Paris, France, Sao Paulo, Brazil, Seoul, Korea, Shanghai, China, Singapore, Sydney, Australia, Copenhagen, Denmark, and Tokyo, Japan.

FINANCIAL RATIOS  of  Blackstone Group (BX)

Valuation Ratios
P/E Ratio 18.8
Price to Sales 3.8
Price to Book 3
Price to Tangible Book
Price to Cash Flow -36.2
Price to Free Cash Flow -34.8
Growth Rates
Sales Growth Rate 10.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -62.7%
Cap. Spend. - 3 Yr. Gr. Rate -3.3%
Financial Strength
Quick Ratio 38
Current Ratio NaN
LT Debt to Equity 137.2%
Total Debt to Equity 138.4%
Interest Coverage 17
Management Effectiveness
Return On Assets 4.8%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 7.5%
Ret/ On T. Cap. - 3 Yr. Avg. 7.3%
Return On Equity 16.3%
Return On Equity - 3 Yr. Avg. 16.9%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 83.1%
Gross Margin - 3 Yr. Avg. 84.6%
EBITDA Margin 51.1%
EBITDA Margin - 3 Yr. Avg. 50.4%
Operating Margin 42.9%
Oper. Margin - 3 Yr. Avg. 41.6%
Pre-Tax Margin 46.5%
Pre-Tax Margin - 3 Yr. Avg. 46.3%
Net Profit Margin 20.3%
Net Profit Margin - 3 Yr. Avg. 18.9%
Effective Tax Rate 5.5%
Eff/ Tax Rate - 3 Yr. Avg. 7.8%
Payout Ratio 194.3%

BX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BX stock intrinsic value calculation we used $5126 million for the last fiscal year's total revenue generated by Blackstone Group. The default revenue input number comes from 2016 income statement of Blackstone Group. 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 BX stock valuation model: a) initial revenue growth rate of 60% 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 7.5%, whose default value for BX is calculated based on our internal credit rating of Blackstone Group, 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 Blackstone Group.
    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 BX stock the variable cost ratio is equal to 66.5%.

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 BX 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 Blackstone Group.

Corporate tax rate of 27% is the nominal tax rate for Blackstone Group. 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 BX 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 BX are equal to 8.5%.

Life of production assets of 26 years is the average useful life of capital assets used in Blackstone Group 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 BX is equal to -54%. 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 - $6461 million for Blackstone Group - 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 1196.97 million for Blackstone Group 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 Blackstone Group at the current share price and the inputted number of shares is $36.4 billion.


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COMPANY NEWS

▶ Backstone Buys Into Permian For $2 Billion   [Apr-23-17 01:00AM  Oilprice.com]
▶ Blackstone Group pays $12.5M for OIA-area warehouse   [01:20PM  American City Business Journals]
▶ Top 7 Financial Stocks to Own for 2017   [12:45PM  TheStreet.com]
▶ Blackstone Group Shows its Brawn   [10:09AM  Barrons.com]
▶ Blackstone Group tops Street 1Q forecasts   [07:24AM  Associated Press]
▶ Downtowns 55 West, Tremont Plaza tower's land sell for combined $116M   [Apr-18-17 11:11AM  American City Business Journals]
▶ Brookdale Worth More on Sale   [Apr-17-17 04:20PM  GuruFocus.com]
▶ [$$] Blackstone Energy to Buy EagleClaw Midstream Ventures   [11:35AM  The Wall Street Journal]
▶ Blackstone Group: Earnings Results Could Be 'Uneventful'   [Apr-14-17 05:14PM  Barrons.com]
▶ The Trump White House is turning into CEO camp   [Apr-11-17 04:06PM  Yahoo Finance]
▶ [$$] Europes New Safe Haven: German Real Estate   [12:27AM  The Wall Street Journal]
▶ Blackstone Announces First Quarter 2017 Media Call   [Mar-30-17 02:45PM  Business Wire]
▶ [$$] Pimco Names Head of Private Strategies   [11:23AM  The Wall Street Journal]
▶ [$$] Last Mile Crucial To Same-Day Service   [12:23AM  at The Wall Street Journal]
▶ [$$] Hedge fund closures hold nuggets for stock market investors   [Mar-27-17 11:11PM  at Financial Times]
▶ Decoding Blackstone's Dividend   [04:01PM  at Motley Fool]
▶ Anadarko cuts jobs tied to recently sold assets   [02:50PM  at bizjournals.com]
▶ [$$] Private equity IPOs: dual-track duel   [Mar-23-17 05:13PM  at Financial Times]
▶ [$$] Asian trio bid for warehouse group Logicor   [10:16AM  at Financial Times]
▶ [$$] Blackstone Looks to Cash Out of European Warehouse Platform   [Mar-22-17 12:06AM  at The Wall Street Journal]
▶ Blackstone Eyes Logicor Sale or IPO for Billions   [Mar-21-17 12:28PM  at Investopedia]
▶ [$$] Fund Investors Load Up on Property Debt   [12:29AM  at The Wall Street Journal]
▶ [$$] Fund Investors Load Up on Property Debt   [Mar-14-17 03:09PM  at The Wall Street Journal]
Stock chart of BX Financial statements of BX
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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