How Can Blackstone Revive Its Discounted Valuations?
The Blackstone Group (BX) has a PE (price-to-earnings) ratio of 11.18x on a next-12-month basis. Its competitors have an average PE ratio of 12.12x, which reflects BX’s discounted valuation.
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Blackstone could recover from its discounted valuations mainly as a result of the significant amount of capital it has available for investments. In 4Q17, the company had $94.8 billion in dry powder even though it made deployments amounting to $50.7 billion in 2017.
Blackstone could witness a rise in its valuations in 2018. The company plans to take up a majority stake in the financial and risk business of Thomson Reuters (TRI). In 2017, the overall private equity industry witnessed fundraising of ~$621 billion.
In 2018, the private equity industry is expected to witness fundraising of ~$750 billion on the back of a rise in the interests of current investors. However, new investors are expected to make an entry into the industry, and positive fundraising momentum could help Blackstone improve its valuations.
On a trailing-12-month basis, BX’s PE ratio stood at 16.18x. Its peers (XLF) Ameriprise Financial, Ares Management, and Oaktree have trailing-12-month PE ratios of 17.77x, 41.12x, and 10.64x, respectively.