Mitch Lawler
4 min read
Blackstone has had a tough year in the market, with the stock down 25.4% year to date. That slide puts fresh focus on a basic question for investors: Is the current share price a fair reflection of the returns the asset manager earns on the capital it deploys across real estate, credit, infrastructure and private equity?
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The 25.4% year to date decline puts real pressure on the idea that Blackstone’s current valuation still lines up with the returns it earns on its investment base.
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Recent deals, from funding Pfizer’s obesity drug development to expanding exposure to AI related and LNG projects, can reshape the timing and risk profile of the cash flows that ultimately support the returns Blackstone earns on capital.
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What if you looked at Blackstone through its earnings instead? See why Blackstone’s 26.7x P/E tells a different valuation story.
The issue now is whether the returns Blackstone generates on its capital are strong and durable enough to make today’s share price look sensible.
If you want a wider lens on how markets are currently pricing cash generation and balance sheet strength, apply the same scrutiny to solid balance sheet and fundamentals stocks screener (23 results).
Where Does Blackstone Sit on Excess Returns?
The Excess Returns model looks at how efficiently Blackstone turns shareholder capital into profits above its own funding cost. On this score, the firm is modeled with a stable EPS of $5.71 per share against a book value of $11.05 per share, implying an average return on equity of 46.70% and an excess return of $4.73 per share over a modeled cost of equity of $0.98 per share.
Those assumptions point to a business that the model treats as capable of earning returns on capital well above its equity charge, with book value projected at $12.23 per share over time. The Excess Returns projections put Blackstone’s estimated intrinsic value broadly in line with the current share price of $118.54. Blackstone’s sizable exposure to Anthropic loans, which credit markets currently classify as speculative, helps explain why the market is not assigning a premium multiple despite the excess return profile implied by the model. Find out what Blackstone could be worth using our Excess Returns estimate.
The Blackstone Narrative: What Would Justify Today’s Price?
Narratives on Simply Wall St pick up where this valuation puzzle for Blackstone leaves off, by explaining which paths for future growth, profitability and earnings would need to occur for the stock to be worth materially more or less than it trades for today. These narratives are available on the platform’s Community page. Each scenario relies on its own set of assumptions rather than a single multiple or model output, so you can track how those inputs compare with actual results over time.
