Friday, April 23, 2010

Bombardier Inc

I would like 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. This stock also stopped all dividend payments between 2005 and 2009.

Perhaps I should have sold this stock when it got into so much trouble with the 2000/2001 bubble. I have had this stock a long time and by the time I was starting to consider selling, the company seemed to have things better under control. So, it is now 2010 and I still have this stock. The problem of having a stock for a long time is that one gets invested into a stock or a company itself and it is hard to sell.

On my spreadsheet, I deal with figures from this company in both US and Canadian Currency. The company switched from reporting in CDN$ to US$ in 2005. What is noticeable is that this company has done better in US$ and in CDN$. However, since I live in Canada and use CDN$, I am very interested in how well a stock performs in CDN$. The other thing you notice is that it is only some 5 year growth figures that are any good.

The 5 year growth in Total Returns at 14.7% per year is perhaps the best figures this stock has. I should point out the dividends make little difference in the Total Returns. First of all, this is because they have only recently been restarted, and secondly, dividend yield has always been quite low on this stock. The Capital Gains for the last 5 years on this stock is 14% per year. This is not far off the Total Returns figures.

The next best figures are for earnings. Over the past 4 years, the earnings in CDN$ have increased by about 30% per year. The other good thing is that Book Value has recently been increasing also. This increase is just some 7.4% per year, but it is encouraging. So, what needs to happen for this to be a better investment stock is better growth in Revenues and Cash Flow. A number of analysts feel that Cash Flow will be picking up this year. The company has some $43.8B in backlog orders, so this should also help with increasing Revenue in 2010 and 2011.

For this company, the Liquidity Ratio and the Asset/Liabilities Ratio are both a little low at 1.39 and 1.22 respectively. I like to see both these ratio at 1.50, but at least they are above 1.00. That means the assets can over the liabilities when the ratio is 1.00 and above. The other ratio that is rather high is the accrual ratio and at 4%, it is fairly high. Please note that these ratios are the same, no matter what currency you are dealing with.

I guess the last thing to talk about is the Return on Equity. Here this company is doing quite well in that the ROE, for the financial year ending in January 2010, is 18.8%. The 5 year running average is also quite good at 17.9%. I intend to hold on to the stock I have. I think that the worst is over for this stock. However, one never does know what the future might hold.

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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