Bombardier Inc. 2

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. Maybe I should have.

There are two classes of shares. Class A shares are multiple voting shares with 10 votes per Share and Class B shares are Subordinate Voting Shares with one vote per share. The Bombardier controls this company through their Class A shares.

As far as I can see, stock options increased the outstanding shares in 2012 and 2013, but not in 2014. When I look at insider trading, I find no insider buying and minimal insider selling.

The 5 year low, median and high median Price/Earnings per Share Ratio are 9.39, 12.34 and 14.94. They are not much different from the corresponding 10 year values of 9.84, 12.37 and 15.12. The current P/E Ratio is 6.27 based on a stock price of $2.34 and a 2015 EPS estimate of $0.37 CDN$. This stock price test suggests that the stock price is relatively cheap.

I cannot get a fix on the Graham Price. The problem is that when you consider preferred shares are generally in front of common shares when it comes to a break up of a company and there for book value, I think that the book value for common shares is really a negative value currently. This is the same reason I cannot use book value to test the current stock price.

Since the company has cancelled the dividends, I cannot use historical and current dividend yield to test the current stock price.

The 10 year median Price/Cash Flow per Share Ratio is 7.19. The current P/CF Ratio is 3.55 based on 2015 CFPS estimate for 2015 of $0.66 CDN$ and a stock price of $2.34. This P/CF Ratio is some 50% lower than the 10 year median P/CF Ratio. This stock price test suggests that the stock price is relatively cheap. You get a similar results using US$ in this test.

The 10 year median P/S Ratio is 0.39. The current P/S Ratio is 0.16 based on 2014 Revenue per Share estimate of $14.60 CDN$ and a stock price of $2.34. This stock price test suggests that the stock price is relatively cheap. You get a similar results using US$ in this test. Another thing to consider is that a P/S Ratio of 0.39 is a very low ratio.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold and Underperform recommendations. The consensus recommendation would be a Hold. The 12 month stock price target is $2.40. This would imply a total return of 2.5%, all capital gains.

The Motley Fool sort of says that Bombardier is a turnaround opportunity. This Financial Post article talks about Bombardier suspending their dividend and trying to raise capital. Another Financial Post article talks about the 5 problems facing Bombardier.

Another recent Motley Fool article suggests that shareholders should take a loss and move on. This may be good advice. This is another Motley Fool article and it says that Bombardier is not telling investors that it may take it 5 years to dig itself out of the hole it has dug for itself.

Sound bite for Twitter and StockTwits is: Stock price cheap for a reason. See my spreadsheet at bbd.htm.

This is the second of two parts. The first part was posted on Monday, February 23, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

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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