Tuesday, June 21, 2011

Bombardier Inc 2

I own this stock (TSX-BBD.B). I first bought this stock in November 1987 and then bought some more in April 1988. I have made a total return on this stock of 14.6% per year. About 3.6% per year of this total return would be dividends. We have been though a lot together, me and this stock. Bombardier had a massive run up and crashed in the last recession. I really cannot complain too much as my initial investment was small.

There is some insider selling, but this is minimal. There is no insider buying. However, the Bombardier family controls this company though multiple voting shares that it holds. It has 64% of the votes. A lot of stock options are outstanding on this company. Both the CEO and CFO have far more stock options than shares.

Only just over 5% of the company is owned by some 23 Institutions. This still can come to a lot invested as this company is worth some $12B. Institutions have increased their shares in this company by around 2.7M shares within the last 3 months.

The 5 year median Price/Earnings Ratio have a low of 10.3 and a high of 14.5. So the current one 14.3 is close to the high median value. I am not going to use the Price/Book Value as the Book Value has dropped significantly under the new IFRS accounting rules and the comparison of old and new P/B Ratios would not mean anything.

However, I can use the Price/Sales (or Revenue) Ratios. The 10 year P/S ratio is 0.63 and the current one is some 54% more at 0.67. This higher P/S ratio points to a rather high current stock price. However, a P/S Ratio under $1.00 is considered to be a good ratio.

The median yield over the past 3 years is 1.92% and the current one of 1.52% shows a rather high current stock price. However, the dividend has not been raised since it was reinstated in 2008. I would think that the aerospace part of the business would have to improve for this to happen. This comes through also with the Graham Price. I get a current Graham Price of $3.18. However, the one at the end of Financial Year January 2011 is higher at $4.85 and might be a better one to use.

The problem with the current one is the much lower book value figures. The current price of $6.59 is some 36% above the Graham Price of $4.85. The median difference over the past 10 years is 58%. So, by this measure, the current stock price is decent. The median high difference between the Graham Price and the stock price is 110%.

When I looked at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would be Strong Buy. (See my site for information on analyst ratings.) Most of the recommendations are in the Strong Buy and Buy range. There are few Holds.

A number of analysts remarked that they think that the aerospace business is picking up. Bombardier’s transportation business is currently very strong. A lot of analysts seem quite bullish on this stock. Recently, when the market has been treading down, Bombardier has been flat or up.

I will continue to hold the shares I have. I think that the Bombardier/Beaudoin family has worked very hard to revive this company. It is one good think about a family owned company. I liked this company better when I first bought it when it had three divisions, not just the current two. The third division was recreational products (which included the snowmobile). The thing with the three divisions was that it seemed there was always one division, if not two, that were making money. I do not remember a time when at least one division was not making money.

However, if I currently had none of this stock, I would probably not be reviewing this company or buying its stock. I think I would instead go for a company like Toromont (TSX-TIH) or SNC-Lavalin (TSX-SNC). A large portion of the profitability of this company relies on the aerospace division. I would never buy an Airlines company (like Air Canada or Westjet). I do not think that they are the sort of stocks to hold for the long term. So, you can imagine, I would not be crazy about a company that makes airplanes. On the other hand, I have no plans to sell this company.

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 64% of the voting rights under this stock. Its web site is here Bombardier. See my spreadsheet at bbd.htm.

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.


  1. Susan,

    Thank you for your honest opinion. Your analysis is always so easy to understand and very well presented. Do you do this at Starbucks every afternoon?

  2. I go to Starbucks each morning for coffee. I have a desktop computer I use in the afternoons to write my blog.