Has BlackRock Run Too Far After $678 Million UK Data Center Investment?

If you have been following BlackRock lately, you might be wondering if it is time to add some shares to your portfolio, trim your position, or just sit tight. On the surface, it might look like BlackRock can do no wrong. The stock has surged more than 24.9% over the past year and has delivered a jaw-dropping 128.7% return over the past five years. Even in the last 30 days, the shares managed a gain of 2.2%, keeping momentum strong after a 1.2% move this past week. That kind of performance naturally grabs attention and raises the question: have you already missed the boat, or is there more to come?

Some recent news has added fuel to the fire. BlackRock is making bold investment moves, including a headline-grabbing plan to invest $678 million in UK data centers, and continues to flex its global influence. Whether it is through infrastructure deals like the $10 billion move with Saudi Aramco, or having key executives listed among possible contenders for the next Federal Reserve Chair, each of these moves underscores BlackRock’s growth ambitions and strategic footprint. It is always up for debate how much these developments influence the stock in the short run.

But an impressive stock chart does not always mean a company is a bargain. When we look at the numbers, BlackRock currently earns a 1 out of 6 on our value scorecard, meaning it only checks one of the six boxes we look for in an undervalued stock. So how does this score stack up under the hood, and what do these valuation metrics actually reveal? Let’s walk through the main approaches investors use to judge value and stick around, because there is an even smarter way to look at BlackRock’s worth that we will explore later.

BlackRock scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: BlackRock Excess Returns Analysis

The Excess Returns valuation model focuses on how much value a company can create above the minimum return investors require for putting their money at risk. In other words, it emphasizes how efficiently BlackRock uses shareholder equity to generate profit compared to what it costs the company to raise capital.

For BlackRock, the numbers tell a layered story. The company boasts a Book Value of $317.55 per share and generates a stable Earnings Per Share (EPS) of $48.12, based on weighted future Return on Equity (ROE) estimates from five analysts. Its average ROE sits at a healthy 16.24%, which is well above many industry peers, while the implied Cost of Equity is $24.42 per share. This results in an Excess Return, a measure of true value creation, of $23.70 per share. The Stable Book Value, averaged from three analysts’ forecasts, comes in at $296.30 per share.

Using these projections, the Excess Returns model estimates BlackRock’s intrinsic value at $755.51 per share. With the current share price trading 53.1% above this value, the model signals that BlackRock is significantly overvalued at present. Even with market-leading profitability, the stock price appears outpaced by its economic fundamentals.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for BlackRock.

Our Excess Returns analysis suggests BlackRock may be overvalued by 53.1%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: BlackRock Price vs Earnings

The price-to-earnings (PE) ratio is one of the most widely used valuation metrics for profitable companies like BlackRock. It tells investors how much they are paying for each dollar of current earnings, and it is especially relevant for established businesses with consistent profitability. The “right” PE ratio for any given company depends on factors such as expected earnings growth, stability, and perceived risk. Growth companies typically command higher PE ratios because investors are willing to pay more today for greater earnings tomorrow. In contrast, higher risk or slower growing companies trade at lower multiples.

Currently, BlackRock trades at a PE ratio of 28x. For context, the average PE among peers in the Capital Markets industry sits at 55.2x. The broader industry average is 27.2x. While BlackRock appears far less expensive than some peers, it is roughly in line with its industry as a whole.

This is where Simply Wall St’s proprietary Fair Ratio comes into play. The Fair Ratio for BlackRock, which considers not just industry averages but also forward earnings growth, profit margin, market cap and company-specific risks, is calculated to be 19.6x. Because this measure incorporates more granular company factors than a simple industry comparison, it provides a more accurate benchmark for fair value.

Comparing BlackRock’s current PE ratio of 28x to its Fair Ratio of 19.6x signals that the shares are trading above what would be considered reasonable, based on its fundamentals and outlook.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your BlackRock Narrative

Earlier we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your story behind BlackRock’s numbers, a way to connect your perspective on its future prospects to your own assumptions about fair value, revenue growth, and profit margins. Narratives turn investing from just crunching numbers into a dynamic process, letting you frame what matters most and see how your expectations translate into a personal fair value.

On Simply Wall St’s Community page, you can easily create or explore Narratives, a tool used by millions of investors. Narratives help you decide if BlackRock is a buy or a sell by comparing your fair value with the current market price, and they are automatically updated as new news or results come out, keeping your story relevant.

For example, one investor using optimistic assumptions values BlackRock at $1,252 per share, expecting rapid revenue growth from private markets and technology. Another, taking a more cautious view, sets a fair value closer to $1,000, anticipating lower growth or margin pressure. With Narratives, you can see countless real, evolving viewpoints and quickly sense check your own outlook against others.

Do you think there's more to the story for BlackRock? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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