Bombardier Inc.

I own this stock of Bombardier Inc. (TSX-BBD.B, OTC-BDRAF). The buying of this stock was part of my early foray into industrial stocks in 1987. Up until 2001, I was making some 35% return per annum on this stock. When the stock first dropped in 2002, I had still made some 28% return per annum on this stock. Even by the lowest point in 2005, I had made some 13% per annum on this stock. By that time, it seemed to be turning itself around, so I never sold.

My return to date is not much different with the total return at 12.37%. Of this return, 7.65% is from capital gains and 4.72% is from dividends. This is not a dividend growth company. Dividends have changed over the years and the company paid no dividends between 2005 and 2008 inclusive. Dividends have remained the same since 2010. On my original purchase price for this stock I am earning a dividend yield of 17.3%.

This stock has gone down this year with total return over the past 5 years being a negative 4.69% per year with 1.82% per year from dividends and capital loss of 6.51% per year. The stock is up over the past 10 years with total return at 5.21% per year with dividends at 1.99% per year and capital gain at 3.23% per year.

The total outstanding shares have not really changed over the past 5 and 10 years. Shares have increased due to share issues and Stock Options. Shares have decreased because of buy backs. Also insiders have been changing from Class A (multiple Voting) to Class B (Subordinate Voting) shares. This company is reporting in US$ and has done so since 2004. The company has done better in US$ terms than in CDN$ terms.

Using 5 year running averages, I find revenue per share up by 2% and 1.5% per year over the past 5 and 10 years, EPS up by 15% and 12% per year over the past 5 and 10 years and cash flow per share up by 2% and down by 7% per year over the past 5 and 10 years. These values are all in US$ terms. So EPS is up nicely, but there is a way to go on revenue and cash flow.

The Return on Equity looks good coming in at 23.4% in 2013. However, why it looks so good is because book value is dropping. Debt Ratios do not look particularly good with Liquidity Ratio at 1.06 and if you add in cash flow after dividends it just reaches 1.15. The Debt Ratio is also low at just 1.09. Leverage and Debt/Equity Ratios are high at 11.99 and 10.99.

The 5 year low, median and high median Price/Earnings Ratios are 9.39, 12.34 and 14.94. The current P/E Ratio is 7.81. The current P/E Ratio is based on $0.46 CDN$ EPS and stock price of $3.60 CDN$. This stock test suggests that the stock is cheap.

I get a Graham Price of $3.63 CDN$. The 10 year low, median and high median Price/Graham Price Ratios are 1.09, 1.48 and 1.81. The current P/GP Ratio is 0.99 based on a stock price of $3.60 CDN$. This stock test suggests that the stock price is cheap.

I get a 10 year Price/Book Value per Share Ratio of 3.15. The current P/B Ratio is 2.58 based on a stock price $3.60 CDN$ and a BVPS of $1.27 CND$. The current P/B Ratio is just 82% of the 10 year P/B Ratio and this stock tests suggests that the stock price is reasonable, but towards to low end. Generally, a stock would be cheap if the current P/B Ratio is 80% or less of the 10 year P/B Ratio.

The current dividend yield is 2.87% based on a stock price of $3.60 CDN$ and dividends of $0.10 CND$. The 5 year median dividend yield is 2.18% a value some 32% lower. This stock test suggests that the stock price is cheap.

The analysts' recommendations for this stock are Strong Buy, Buy, Hold and Underperform. Most of the recommendations are a Hold and the consensus recommendation would be a Hold. The 12 month stock price consensus is $4.46. This implies a total return of 26.75% with 23.89% from capital gains and 2.87% from dividends.

In January of 2014, Bombardier said that they are laying off 1,700 aerospace employees due to C Series delays and declining orders. Another financial post article in February 2014 talks about the shares of Bombardier falling due to missed estimates for 2014 earnings. In happier news, an article in the Globe and Mail talks about Bombardier winning a rail contract in Australia.

The stock price appears cheap, but it would seem with reason. See my spreadsheet at bbd.htm.

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 Montreal, 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.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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