Blackstone is an asset management firm. It recently made a few of the companies they own go public: Sea World, Pinnacle Foods, Hilton, and Michael’s. The company is currently undervalued based on many factors.
AUM (Assets Under Management) Growth and Net Income Growth
Blackstone has been aggressively growing their AUM and net income over the past few years, ever since their company began to be profitable in late 2012. Since then net income has spiked from just $89 million to over $1.5 billion now. Also, its AUM grew to $278 billion in 2014, a growth rate of 21% from its 2013 AUM. Its share price, however, does not reflect this growth as it has remained relatively unchanged ever since the beginning of 2014, signaling that the company is currently undervalued based on their earnings and AUM growth relative to share price growth. This point is further made, since the current P/E ratio is only 15, and the forward P/E ratio of the company is a minute 9. A company with such fast growing earnings and AUM should definitely not be trading at a fair current valuation and a heavily discounted projected valuation.
Asset Management Industry Growth
The asset management industry itself is poised for much growth in the future, as the alternative investments that Blackstone offers to their clients (real estate, private equity, bonds, etc.) have preformed well over the past few years, especially during the Great Recession, giving them much popular demand which in turn drives up the earnings of the companies that offer them as investments. Economic recoveries, such as the current economic condition, also drive up asset management and private equity earnings, as the retail investor makes up much of Blackstone’s clientele, and they typically must wait for an extended increase in the market in order to begin investing, such as now.
Blackstone is a fast growing company that is being undervalued by the market. Rarely do investors get the chance to buy such a market-dominant and fast-growing company at such a low price.
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