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What Led to Blackstone’s Premium Valuation

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Updated

Higher valuation

Blackstone Group’s (BX) one-year price target is $40.00 per share, implying an increase of 23.72% from the current price of $32.33 per share. As of June 30, 2017, Blackstone’s total capital available for investment stood at $90.0 billion, of which the company’s private equity division has available capital of $37.5 billion, and the real estate division has available capital of $31.7 billion.

The company’s hedge fund solutions and credit divisions have available capital of $3.8 billion and $17.0 billion, respectively, for investments. Blackstone’s one-year forward price-to-earnings ratio is 11.4x, whereas competitors’ average ratio is 8.7x. Other alternative asset managers’ (XLF) ratios are as follows:

  • Apollo Global Management (APO), 11.8x
  • KKR (KKR), 7.0x
  • The Carlyle Group (CG), 7.2x

According to Blackstone management, the company could see significant inflows in 2H17, which could boost its valuation further.

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Price-to-book ratios

Blackstone’s price-to-book ratio is 3.2x. To compare, peers’ ratios are as follows:

  • Apollo Global Management (APO), 5.7x
  • The Carlyle Group (CG), 3.6x
  • KKR (KKR), 1.4x

Correction: This article originally stated that Blackstone’s one-year price target was $25.50. Its actual one-year price target is $40.00, a 23.72% rise from its current price of $32.33.

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