Blackstone (NYSE:BX) jumps 4.6% this week, though earnings growth is still tracking behind five-year shareholder returns

Simply Wall St · 10/16 12:46

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Blackstone Inc. (NYSE:BX) stock is up an impressive 218% over the last five years. Also pleasing for shareholders was the 16% gain in the last three months.

Since the stock has added US$5.3b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Blackstone

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Blackstone managed to grow its earnings per share at 7.7% a year. This EPS growth is lower than the 26% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 59.98.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NYSE:BX Earnings Per Share Growth October 16th 2024

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Blackstone's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Blackstone, it has a TSR of 281% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Blackstone shareholders have received a total shareholder return of 53% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 31% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Blackstone (of which 1 can't be ignored!) you should know about.

Blackstone is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.