Intrinsic value of Blackstone Group - BX

Previous Close

$31.88

  Intrinsic Value

$64.76

stock screener

  Rating & Target

str. buy

+103%

Previous close

$31.88

 
Intrinsic value

$64.76

 
Up/down potential

+103%

 
Rating

str. buy

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

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 38.2

 

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
  22.00
  20.30
  18.77
  17.39
  16.15
  15.04
  14.03
  13.13
  12.32
  11.59
  10.93
  10.33
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
Revenue, $m
  5,126
  6,254
  7,523
  8,935
  10,489
  12,184
  14,016
  15,983
  18,082
  20,309
  22,662
  25,139
  27,737
  30,455
  33,294
  36,254
  39,335
  42,541
  45,875
  49,339
  52,939
  56,680
  60,568
  64,611
  68,815
  73,188
  77,741
  82,482
  87,421
  92,570
  97,940
Variable operating expenses, $m
 
  4,121
  4,923
  5,814
  6,796
  7,866
  9,023
  10,265
  11,590
  12,997
  14,482
  15,874
  17,515
  19,232
  21,024
  22,893
  24,839
  26,863
  28,968
  31,156
  33,429
  35,791
  38,247
  40,799
  43,454
  46,216
  49,091
  52,085
  55,204
  58,455
  61,846
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
  4,121
  4,923
  5,814
  6,796
  7,866
  9,023
  10,265
  11,590
  12,997
  14,482
  15,874
  17,515
  19,232
  21,024
  22,893
  24,839
  26,863
  28,968
  31,156
  33,429
  35,791
  38,247
  40,799
  43,454
  46,216
  49,091
  52,085
  55,204
  58,455
  61,846
Operating income, $m
  2,197
  2,133
  2,601
  3,121
  3,694
  4,318
  4,994
  5,718
  6,492
  7,313
  8,180
  9,265
  10,222
  11,224
  12,270
  13,361
  14,496
  15,678
  16,906
  18,183
  19,510
  20,889
  22,321
  23,811
  25,361
  26,972
  28,650
  30,397
  32,218
  34,115
  36,094
EBITDA, $m
  2,280
  2,325
  2,797
  3,322
  3,900
  4,530
  5,211
  5,943
  6,723
  7,551
  8,426
  9,347
  10,313
  11,323
  12,379
  13,479
  14,625
  15,817
  17,056
  18,344
  19,683
  21,074
  22,519
  24,022
  25,586
  27,212
  28,904
  30,667
  32,504
  34,418
  36,415
Interest expense (income), $m
  152
  310
  461
  633
  824
  1,035
  1,264
  1,512
  1,778
  2,062
  2,364
  2,682
  3,017
  3,369
  3,737
  4,121
  4,522
  4,939
  5,373
  5,824
  6,293
  6,780
  7,286
  7,813
  8,360
  8,929
  9,521
  10,137
  10,778
  11,447
  12,144
Earnings before tax, $m
  2,382
  1,822
  2,139
  2,488
  2,869
  3,284
  3,730
  4,206
  4,714
  5,251
  5,816
  6,582
  7,205
  7,855
  8,533
  9,240
  9,975
  10,739
  11,534
  12,359
  13,217
  14,109
  15,035
  15,999
  17,001
  18,044
  19,130
  20,261
  21,439
  22,668
  23,950
Tax expense, $m
  132
  492
  578
  672
  775
  887
  1,007
  1,136
  1,273
  1,418
  1,570
  1,777
  1,945
  2,121
  2,304
  2,495
  2,693
  2,900
  3,114
  3,337
  3,569
  3,809
  4,060
  4,320
  4,590
  4,872
  5,165
  5,470
  5,789
  6,120
  6,467
Net income, $m
  1,039
  1,330
  1,562
  1,816
  2,095
  2,397
  2,723
  3,071
  3,441
  3,833
  4,246
  4,805
  5,259
  5,734
  6,229
  6,745
  7,282
  7,840
  8,420
  9,022
  9,648
  10,299
  10,976
  11,679
  12,411
  13,172
  13,965
  14,790
  15,651
  16,548
  17,484

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
  28,687
  34,510
  40,988
  48,117
  55,889
  64,294
  73,318
  82,945
  93,162
  103,956
  115,316
  127,233
  139,704
  152,726
  166,302
  180,438
  195,144
  210,434
  226,325
  242,838
  259,999
  277,836
  296,379
  315,663
  335,727
  356,610
  378,358
  401,016
  424,635
  449,266
Adjusted assets (=assets-cash), $m
  23,561
  28,687
  34,510
  40,988
  48,117
  55,889
  64,294
  73,318
  82,945
  93,162
  103,956
  115,316
  127,233
  139,704
  152,726
  166,302
  180,438
  195,144
  210,434
  226,325
  242,838
  259,999
  277,836
  296,379
  315,663
  335,727
  356,610
  378,358
  401,016
  424,635
  449,266
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
  532
  639
  760
  892
  1,036
  1,191
  1,359
  1,537
  1,726
  1,926
  2,137
  2,358
  2,589
  2,830
  3,082
  3,344
  3,616
  3,899
  4,194
  4,500
  4,818
  5,148
  5,492
  5,849
  6,221
  6,608
  7,011
  7,431
  7,868
  8,325
Working capital, $m
  0
  -3,377
  -4,063
  -4,825
  -5,664
  -6,579
  -7,569
  -8,631
  -9,764
  -10,967
  -12,238
  -13,575
  -14,978
  -16,446
  -17,979
  -19,577
  -21,241
  -22,972
  -24,772
  -26,643
  -28,587
  -30,607
  -32,707
  -34,890
  -37,160
  -39,522
  -41,980
  -44,540
  -47,208
  -49,988
  -52,888
Total debt, $m
  8,942
  13,183
  18,092
  23,553
  29,562
  36,115
  43,200
  50,807
  58,923
  67,536
  76,635
  86,211
  96,258
  106,770
  117,748
  129,193
  141,109
  153,506
  166,396
  179,792
  193,713
  208,179
  223,215
  238,847
  255,104
  272,018
  289,623
  307,956
  327,056
  346,967
  367,732
Total liabilities, $m
  19,942
  24,183
  29,092
  34,553
  40,562
  47,115
  54,200
  61,807
  69,923
  78,536
  87,635
  97,211
  107,258
  117,770
  128,748
  140,193
  152,109
  164,506
  177,396
  190,792
  204,713
  219,179
  234,215
  249,847
  266,104
  283,018
  300,623
  318,956
  338,056
  357,967
  378,732
Total equity, $m
  6,461
  4,504
  5,418
  6,435
  7,554
  8,775
  10,094
  11,511
  13,022
  14,626
  16,321
  18,105
  19,976
  21,934
  23,978
  26,109
  28,329
  30,638
  33,038
  35,533
  38,126
  40,820
  43,620
  46,531
  49,559
  52,709
  55,988
  59,402
  62,959
  66,668
  70,535
Total liabilities and equity, $m
  26,403
  28,687
  34,510
  40,988
  48,116
  55,890
  64,294
  73,318
  82,945
  93,162
  103,956
  115,316
  127,234
  139,704
  152,726
  166,302
  180,438
  195,144
  210,434
  226,325
  242,839
  259,999
  277,835
  296,378
  315,663
  335,727
  356,611
  378,358
  401,015
  424,635
  449,267
Debt-to-equity ratio
  1.384
  2.930
  3.340
  3.660
  3.910
  4.120
  4.280
  4.410
  4.520
  4.620
  4.700
  4.760
  4.820
  4.870
  4.910
  4.950
  4.980
  5.010
  5.040
  5.060
  5.080
  5.100
  5.120
  5.130
  5.150
  5.160
  5.170
  5.180
  5.190
  5.200
  5.210
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
  1,330
  1,562
  1,816
  2,095
  2,397
  2,723
  3,071
  3,441
  3,833
  4,246
  4,805
  5,259
  5,734
  6,229
  6,745
  7,282
  7,840
  8,420
  9,022
  9,648
  10,299
  10,976
  11,679
  12,411
  13,172
  13,965
  14,790
  15,651
  16,548
  17,484
Depreciation, amort., depletion, $m
  83
  192
  196
  201
  206
  212
  218
  224
  231
  238
  246
  82
  91
  100
  109
  119
  129
  139
  150
  161
  173
  185
  198
  211
  225
  239
  254
  270
  286
  303
  320
Funds from operations, $m
  -2,053
  1,523
  1,758
  2,017
  2,301
  2,609
  2,940
  3,295
  3,672
  4,071
  4,492
  4,887
  5,350
  5,834
  6,338
  6,863
  7,410
  7,979
  8,570
  9,184
  9,822
  10,485
  11,174
  11,890
  12,636
  13,411
  14,219
  15,060
  15,937
  16,851
  17,804
Change in working capital, $m
  -1,512
  -609
  -686
  -763
  -839
  -915
  -989
  -1,062
  -1,133
  -1,203
  -1,271
  -1,337
  -1,403
  -1,468
  -1,533
  -1,598
  -1,664
  -1,731
  -1,800
  -1,871
  -1,944
  -2,020
  -2,100
  -2,183
  -2,270
  -2,362
  -2,458
  -2,560
  -2,667
  -2,780
  -2,900
Cash from operations, $m
  -541
  2,132
  2,444
  2,780
  3,140
  3,524
  3,930
  4,357
  4,805
  5,274
  5,763
  6,225
  6,753
  7,302
  7,871
  8,462
  9,074
  9,710
  10,369
  11,054
  11,766
  12,505
  13,273
  14,073
  14,906
  15,773
  16,677
  17,620
  18,604
  19,631
  20,704
Maintenance CAPEX, $m
  0
  -17
  -20
  -25
  -29
  -34
  -40
  -46
  -52
  -59
  -66
  -74
  -82
  -91
  -100
  -109
  -119
  -129
  -139
  -150
  -161
  -173
  -185
  -198
  -211
  -225
  -239
  -254
  -270
  -286
  -303
New CAPEX, $m
  -22
  -96
  -108
  -120
  -132
  -144
  -156
  -167
  -178
  -189
  -200
  -210
  -221
  -231
  -241
  -252
  -262
  -273
  -283
  -294
  -306
  -318
  -331
  -344
  -357
  -372
  -387
  -403
  -420
  -438
  -456
Cash from investing activities, $m
  -29
  -113
  -128
  -145
  -161
  -178
  -196
  -213
  -230
  -248
  -266
  -284
  -303
  -322
  -341
  -361
  -381
  -402
  -422
  -444
  -467
  -491
  -516
  -542
  -568
  -597
  -626
  -657
  -690
  -724
  -759
Free cash flow, $m
  -570
  2,019
  2,315
  2,635
  2,979
  3,345
  3,734
  4,144
  4,575
  5,025
  5,496
  5,940
  6,450
  6,980
  7,530
  8,101
  8,694
  9,309
  9,947
  10,610
  11,298
  12,014
  12,758
  13,532
  14,337
  15,176
  16,051
  16,963
  17,914
  18,908
  19,945
Issuance/(repayment) of debt, $m
  2,900
  4,316
  4,909
  5,461
  6,010
  6,552
  7,085
  7,607
  8,116
  8,613
  9,099
  9,576
  10,047
  10,513
  10,978
  11,444
  11,917
  12,397
  12,889
  13,396
  13,921
  14,467
  15,036
  15,632
  16,257
  16,914
  17,605
  18,333
  19,101
  19,910
  20,765
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
  4,316
  4,909
  5,461
  6,010
  6,552
  7,085
  7,607
  8,116
  8,613
  9,099
  9,576
  10,047
  10,513
  10,978
  11,444
  11,917
  12,397
  12,889
  13,396
  13,921
  14,467
  15,036
  15,632
  16,257
  16,914
  17,605
  18,333
  19,101
  19,910
  20,765
Total cash flow (excl. dividends), $m
  2,019
  6,335
  7,224
  8,096
  8,989
  9,898
  10,819
  11,751
  12,691
  13,639
  14,595
  15,516
  16,497
  17,493
  18,508
  19,546
  20,610
  21,706
  22,836
  24,006
  25,219
  26,480
  27,794
  29,163
  30,594
  32,090
  33,656
  35,296
  37,015
  38,818
  40,709
Retained Cash Flow (-), $m
  -191
  -810
  -914
  -1,017
  -1,119
  -1,220
  -1,320
  -1,417
  -1,511
  -1,604
  -1,695
  -1,783
  -1,871
  -1,958
  -2,044
  -2,131
  -2,219
  -2,309
  -2,400
  -2,495
  -2,593
  -2,694
  -2,800
  -2,911
  -3,028
  -3,150
  -3,279
  -3,414
  -3,557
  -3,708
  -3,867
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
 
  8,292
  6,310
  7,079
  7,869
  8,677
  9,500
  10,334
  11,179
  12,034
  12,901
  13,733
  14,625
  15,535
  16,463
  17,414
  18,391
  19,397
  20,436
  21,511
  22,627
  23,786
  24,993
  26,252
  27,566
  28,940
  30,377
  31,882
  33,458
  35,110
  36,842
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
 
  7,714
  5,423
  5,578
  5,640
  5,610
  5,489
  5,286
  5,010
  4,674
  4,292
  3,865
  3,437
  3,005
  2,584
  2,183
  1,810
  1,473
  1,176
  919
  703
  526
  384
  274
  190
  129
  85
  54
  33
  20
  12
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 global alternative asset manager. The Company's alternative asset management businesses include investment vehicles focused on private equity, non-investment grade credit, secondary private equity funds of funds and multi-asset class strategies. It operates through four segments: Private Equity, Real Estate, Hedge Fund Solutions and Credit. The Private Equity segment includes its corporate private equity business, which consists of its corporate private equity funds, Blackstone Capital Partners (BCP) funds, its sector-focused corporate private equity funds, including its energy-focused funds, Blackstone Energy Partners (BEP) funds and its core private equity fund. The Blackstone Real Estate Partners funds target a range of opportunistic real estate and real estate related investments. The Hedge Fund Solutions segment consists of Blackstone Alternative Asset Management (BAAM). The Credit segment consists principally of GSO Capital Partners LP (GSO).

FINANCIAL RATIOS  of  Blackstone Group (BX)

Valuation Ratios
P/E Ratio 19.7
Price to Sales 4
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow -37.9
Price to Free Cash Flow -36.4
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 22% 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 1198.2 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 $38.2 billion.

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COMPANY NEWS

▶ Blackstone May Do Its Cleverest CDS Trade Again   [Nov-17-17 11:27AM  Bloomberg]
▶ Kiplinger's Favorite High-Yield Dividend Stocks   [Nov-16-17 01:30PM  Kiplinger]
▶ Joan Solotar joins Tyler Mathisen from Schwab Impact   [Nov-15-17 02:31PM  CNBC Videos]
▶ [$$] Cloverleaf Cold Storage to Be Recapitalized by Blackstone   [Nov-13-17 05:33PM  The Wall Street Journal]
▶ [$$] Stuytown Owners Make Solar-Panel Investment   [01:16AM  The Wall Street Journal]
▶ [$$] Stuytown Owners Make Solar-Panel Investment   [Nov-07-17 06:40PM  The Wall Street Journal]
▶ EU mergers and takeovers (Nov 3)   [Nov-03-17 11:56AM  Reuters]
▶ How Blackstones Valuation Compares   [Nov-01-17 10:31AM  Market Realist]
▶ A Look at Blackstones Assets Under Management   [09:01AM  Market Realist]
▶ [$$] Blackstone Buys Logistics Portfolio for $500 Million   [04:22PM  The Wall Street Journal]
▶ Behind Blackstones Hedge Fund Solutions   [10:37AM  Market Realist]
▶ Why Blackstone Saw Strong Results in 3Q17   [Oct-30-17 05:23PM  Market Realist]
▶ The Future Price of Investing: Zilch   [12:01AM  Bloomberg]
▶ [$$] Carlyle Group rings the changes in private equity   [Oct-25-17 12:44PM  Financial Times]
▶ EU mergers and takeovers (Oct 23)   [Oct-23-17 01:09PM  Reuters]
▶ Bears Knock Down Stocks, But Blackstone Breaks Out   [10:21AM  Investor's Business Daily]
▶ [$$] Blackstone's Profit Rises   [07:51AM  The Wall Street Journal]
▶ Blackstone Group beats Street 3Q forecasts   [07:29AM  Associated Press]
▶ [$$] EU Opens Investigation Into Celanese, Blackstone Joint Venture   [Oct-17-17 01:52PM  The Wall Street Journal]
▶ Blackstone Closes Acquisition of Harvest Fund Advisors LLC   [Oct-16-17 04:58PM  Business Wire]
▶ [$$] Blackstone Targets Millionaire Next Door   [12:17AM  The Wall Street Journal]
▶ [$$] Barbarians Open Their Gates as Blackstone, Others Seek Retail Cash   [Oct-15-17 03:11PM  The Wall Street Journal]
▶ Blackstone Seeks $10 Billion for Infrastructure   [Oct-13-17 04:37PM  Bloomberg]
▶ Blackstone: Simple math makes us bullish on housing   [Oct-07-17 08:33AM  Yahoo Finance]
▶ London Eye Owner Sets Its Sights on SeaWorld   [Oct-04-17 04:24PM  Bloomberg]
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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