Investors Interested In Blackstone Inc.'s (NYSE:BX) Earnings

Blackstone Inc.'s (NYSE:BX) price-to-earnings (or "P/E") ratio of 54.6x might make it look like a strong sell right now compared to the market in the United States, where around half of the companies have P/E ratios below 17x and even P/E's below 10x are quite common. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Blackstone has been doing quite well of late. It seems that many are expecting the company to continue defying the broader market adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

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Is There Enough Growth For Blackstone?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Blackstone's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 68% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 59% drop in EPS in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 34% each year during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 10% each year growth forecast for the broader market.

In light of this, it's understandable that Blackstone's P/E sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Blackstone's P/E?

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Blackstone maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 3 warning signs for Blackstone (1 shouldn't be ignored!) that you need to take into consideration.

If these risks are making you reconsider your opinion on Blackstone, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.