Monday, April 26, 2010

Bombardier Inc 2

I would like to continue to talk about this stock (TSX-BBD.B) today, as the January 2010 annual report is in and I own this stock. This is one of the first stocks I bought. I bought this stock in 1987 and I have made a return, including dividends, of 14.8% per year. I made money on this stock until 2001. Then for several years, the stock languished and then this stock started to again make some money from 2005.

When I look at the Insider Buying and Insider Selling report, I find that there is only some selling of just over $1M. Not much when you consider that, this is a $9B company. Also, all the selling is by officers of the company, and at least the officers of this company have more stock than options. It would be nice if they raised their dividends, but even when it was declaring dividends previously, it did not raise them yearly.

When I look at the 5 year average low P/E, I get one of 11.9 and the 5 year average high is 23.9. I get a current P/E based on earnings estimates for 2010 of 14.4. This is not a bad P/E ratio. The Graham Price I get for 2010 is $4.40 and this is some 21% lower than the current stock price of $5.33. Before this stock had problems with the 2000/2001 recession, the Stock Price was way above the Graham Price. However, in the last few years, you have been able each year to get this stock at sometime during the year at or below the Graham Price.

The next thing is the Price/Book Value Ratio. This ratio does not depend on any estimates and the current ratio of 2.30 is only 73% of the 10 year average of 3.15. A good stock price is when the current P/BV is 80% or lower than the 10 year average. The last thing to look at is the dividend yield. The current dividend yield is 1.9%. The 2 year average, since they just restated dividend payments is 1.7%. However, the dividend yield was 1% or lower when this stock last paid dividends. The other thing to note, however, is that this stock will probably never be the high flying stock it used to be in the past. It should do well, but not great.

When I look at analysts’ recommendations, find Strong Buy, Buy, Hold and Underperform recommendations. The consensus would be a Buy. (See my site for information on analyst ratings.) The difference between the Hold and Buy recommendations seem to be what the analyst think the stock price will be over the next 12 months. The Buy recommendations talk about the incredible turnaround in this company over the past 10 years and that train and plane business will improve in the future. They also talk about the backlog of orders this company has. The ones with underperform talk about the fact that the glory days of this company is behind it and will never return.

The ratios I talked about above show that the stock price is a good one. It has been better, but the price is not unreasonable. I think to have a balance portfolio; you need to have industrial stock. This was a great stock in the past, and I think it will be a very good one going forward. This is why I have retaining this stock.

Bombardier is a world-leading manufacturer of innovative transportation solutions, from commercial aircraft and business jets to rail transportation equipment, systems and services. Headquartered in Montréal, Canada, Bombardier has a presence in more than 60 countries. The Bombardier family controls 54% of the voting rights under this stock. Its web site is See my spreadsheet at

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 for stocks followed and investment notes. Follow me on twitter.

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