Bombardier Inc 2

Is this currently a good stock (TSX-BBD.B) to buy? Considering the business that it is in, this stock is a high risk. So, if you cannot stand to invest in a high risk stock, this stock is not for you. The insiders are overall, selling not buying. Some people have a buy rating and some a hold rating. It seems some have changed to a buy when the stock has come down from the high $8 range to the high $6 range. For the past year, this stock has done better then the TSX and recent decline is with the current market decline.

This stock has an the financial year ending at January 31each year, so the financial data I am looking at is the year ending at January 31, 2008. Everyone seems to expect the Earnings per Share (EPS) to be substantially higher for the 2009 annual report. Most expect the EPS to be in the low $.50 range. Since the dividend payments have been restarted, Bombardier is expecting earnings to improve also. If the EPS is $.51, then the dividend yield will be 19.6%. This stock’s dividend yield has been in the low 20% range, so this seems a reasonable EPS to expect.

Cash flows were very strong for the year ending in January 31, 2008, but I do not expect this to be repeated at the same rate for the current year, but they should be stronger than in the past few years. The asset/liability ratio is low at 1.18 for January 2008 and slightly worse at 1.16 for April 2008. However, the ratio for this stock has never been high. The company carries a lot of debt. The Return on Equity (ROE) is better for 2008 at 10.2%, but it is not back to where it was before the stock got into trouble. The Accrual Ratio is very good at -7.4%. This is one of the few bright spots for this stock.

This is clearly a turn around situation and as such is a risky situation. So, clearly, unless you can stand a lot of risk, you should not invest in this stock. However, I feel that this stock could once again become a great stock for my portfolio. The stock certainly seems to be getting back on track. However, it is still in the airplane business and this, as always, is risky.

See my spreadsheet on this company at http://ca.geocities.com/brunnsu@rogers.com/bbd.htm. The problem with this company is that the stock price is only in Canadian Dollars, but the financial reporting is in US Dollars. To make the spreadsheet figures compatible, I have used the US Dollar financial figures and converted the stock prices into US Dollars. I also show revenue, earnings and dividends in Canadian Dollars

Bombardier is a manufacturer of business jets, regional aircraft and rail transportation equipment. They also provide financial services and asset management. They are an international company, selling and manufacturing all over the world. The controlling shareholder is the Bombardier family. Its web site is http://www.bombardier.com/.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at http://ca.geocities.com/brunnsu@rogers.com/opinion.html for a list of the stocks for which I have put up spreadsheets on web site.