BlackRock or State Street: which stock to choose?
2026-07-09 · By Lubin Danilo, founder of Lubin Investment
Analyze a stock on Lubin Investment
BlackRock, the world's largest asset manager, trades at 73.6 times its annual cash flow and scores only 5 out of 10 in my screener. State Street, far less known to the public, trades at just 2.3 times and scores 6 out of 10. The most prestigious brand is not always the best deal.
Two faces of asset management
BlackRock is the name everyone knows: the world's largest asset manager, several trillion dollars under management, and the brand behind the iShares ETFs owned by millions of individual investors. State Street is far more discreet to the general public, but just as central to global finance: it is a custody bank (safekeeping the assets of massive institutional investors) that also runs its own funds through State Street Global Advisors and the SPDR ETFs.
Two neighboring businesses, two comparable sizes in terms of market influence, but when I run them through my 10 criteria, the gap that appears is one of the most striking I have observed between two direct competitors.
The most striking valuation gap I have observed
BlackRock trades at 73.6 times its annual free cash flow. State Street, at 2.3 times. The market is therefore paying roughly 32 times more for BlackRock than for State Street, for every dollar of cash generated. A gap this large between two companies in the same sector deserves a closer look at what justifies it, or does not.
Why BlackRock is expensive, and why quality does not quite back it up
On paper, BlackRock remains a powerful company: a net margin of 24.4%, a global footprint, an established brand. But my screener does not stop at reputation. Several criteria fail outright: free cash flow per share has fallen 8.1% a year over five years, cash return on invested capital caps out at 6.7% (below my 15% threshold), and operating leverage also fails, a sign of margins compressing rather than expanding.
The number that worries me most: the cash conversion rate does not exceed 37%. In other words, out of 100 dollars of accounting profit, barely 37 actually turn into available cash. For an asset manager, this can reflect performance fees booked before actually being collected, or seed capital investments in its own funds that tie up cash. Whatever the exact cause, it is not a reassuring signal. The result on price: my fair buy price calculation sets the bar at 215.69 dollars, while the stock trades today around 1,019.68 dollars, nearly 5 times that threshold.
Why State Street is so cheap
State Street is not a perfect company either: its revenue growth caps out at 3.4% a year, an outright fail in my screener, and operating leverage also fails, with margins compressing somewhat here too. It is a mature business, not a growth machine.
But two points set it clearly apart. First, very aggressive share buybacks: -6.45% a year on shares outstanding, a rare pace that mechanically boosts the remaining per share value. Second, a cash conversion rate of 6.4, well above the norm, although I stay cautious about the exact interpretation of this figure for a financial company (as with BlackRock, free cash flow margin at financial firms behaves differently than at industrial companies, given their balance sheet is made of financial assets and liabilities). My fair buy price for State Street comes out at 410.52 dollars, against a current price around 180.16 dollars, roughly 56% below that threshold.
| Criterion | BlackRock | State Street |
|---|---|---|
| Quality score | 5 / 10 | 6 / 10 |
| P/FCF | 73.6 times | 2.3 times |
| Net margin | 24.4% | 20.5% |
| FCF per share growth (5 years) | -8.1%/year | 7.4%/year |
| Share buybacks (5 years) | -0.48%/year | -6.45%/year |
| Fair buy price vs current price | $215.69 vs $1,019.68 (overvalued) | $410.52 vs $180.16 (undervalued) |
Both report results next week
BlackRock reports on July 15, 2026, before markets open, with a consensus of 12.67 dollars earnings per share on revenue expected near 6.82 billion dollars. State Street reports the next day, July 16, also before the open, with a consensus of 3.28 dollars earnings per share on revenue expected around 3.88 billion dollars. Both releases will be a chance to check whether the trends behind my two warning criteria, BlackRock's cash and State Street's growth, are improving or being confirmed.
How I am calling it
The best known, most prestigious brand is not always the best deal, and this head to head illustrates it well. BlackRock remains a dominant player with a strong brand, but on my objective criteria, its current fundamental quality (5 out of 10) does not justify such an extreme valuation premium over State Street (6 out of 10, so slightly better scored, at a price 32 times cheaper on the P/FCF criterion alone). This is no guarantee State Street will perform well, its growth stays sluggish, but on strict quality and price grounds, it is the name offering the wider margin of safety of the two today. To compare other financial institutions, my full methodology details the 10 criteria I use, and my ranking of undervalued stocks lists other names in a similar situation.
- BlackRock trades at 73.6 times its annual cash flow, State Street at just 2.3 times, a 32 fold gap between the two.
- BlackRock fails several key criteria: FCF per share declining (-8.1%/year), weak capital returns (6.7%), and above all a cash conversion rate of only 37%.
- State Street shows sluggish revenue growth (3.4%/year) but very aggressive buybacks (-6.45%/year) supporting per share value.
- My fair buy price puts BlackRock at roughly 5 times below its current price, and State Street 56% above its current price.
- Both report earnings on July 15 and 16, 2026, worth watching to confirm or challenge these trends.
FAQ
Why is BlackRock so expensive compared to State Street?
Mainly the brand and the premium given to the world's number one asset manager. But on my objective criteria, BlackRock's current fundamental quality (5 out of 10, declining cash, weak capital returns) does not fully justify this valuation gap against State Street.
Is BlackRock's 37% cash conversion rate concerning?
It is the point that worries me most in this analysis. It could reflect performance fees booked before collection or seed capital investments. Whatever the cause, a rate this low deserves close monitoring in coming quarters.
Is State Street a better stock than BlackRock?
On combined quality and price, yes, by my method: a slightly higher score (6 vs 5 out of 10) at a price well below the threshold I consider fair. But its revenue growth stays weak, it is not a perfect company either.
When do BlackRock and State Street report earnings?
BlackRock on July 15, 2026, before markets open, State Street the next day, July 16, also before the open.
Why are State Street's buybacks so high?
At -6.45% a year, it is a rare pace that sharply reduces shares outstanding, mechanically increasing the share of the company, and therefore of generated cash, that each remaining shareholder owns.
Analyze a stock on Lubin Investment
About the author
Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).