BlackRock (BLK) announced profit growth of just 1% last qtr, on a 5% rise in sales. Profit growth didn’t match sales growth due to a higher than normal tax rate. The company had $24 billion in fund inflows, but $31 billion in low-fee institutional outflows, resulting in a net outflow $7 billion in assets.
BlackRock isn’t a timely stock right now. The P/E is 17 which around is where it should be, so the stock’s fairly valued. And with +1% profit growth investors aren’t clamoring to climb aboard.
Ten Year Chart
This stock really made a run in 2013 and 2014, but now with +4% profit growth expected for 2015 BLK looks to have peaked in the short run. A stagnant stock market doesn’t help grow the asset base either.
Estimates show profits are expected to fall 5% next qtr, then rise 10% the quarter after that (see One-Year Chart link below). Neither number is exciting, but BLK has beaten the street in each of the last 4 qtrs.
Also, 2015’s earnings estimate is currently $20.14, down from $20.54 late last year, another reason the stock isn’t rising.
Profit History
Overall this stock is selling for 17x earnings, but I feel it is worth 16x because profit growth isn’t what it used to be. Management uses cash to buy back stock as well as pay a dividend. The yield is around 2 1/2%.
BLK’s estimated long-term profit growth rate is 11% per year, and if we tack on the 2.5% yeild this looks to be a stock that can provide a 13.5% return on an annual basis.
Sharek’s Take
BlackRock is one of my favorite companies, as mutual fund companies and asset managers are usually solid investments. But at this juncture BLK is overvalued by 8% and has just 3% upside to 2015’s Fair Value. If I were wanting to get in the stock I would wait for a better entry point. Long-term investors who own the stock can continue to hold onto their position.
View the One Year Chart here. View the Earnings Table here.
