Wednesday, February 24, 2016

Bombardier Inc.

Sound bite for Twitter and StockTwits is: Probably a hold or sell. I will hold my shares for a while longer. I have had this stock for quite some time. I hope the company will survive, but this is not a certainty. See my spreadsheet on Bombardier Inc.

I own this stock of Bombardier Inc. (TSX-BBD.B, OTC-BDRBF). 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. This is probably one of my failures in stock investing.

Currently I have earned $0.38 capital gain per share and $1.91 dividends per share for a total of $2.30 per share. Dividends have been paid on and off on this stock. Dividends were last cut in 2014. Even if the stock value goes to zero, I would have made to date a total return of 8.03% per year.

Shares have increased by 5.2% and 2.4% per year over the past 5 and 10 years. I am sure that if the Federal Government also comes to the rescue there will be a price to be paid for it. This company has always been very good at extracting money from governments.

Certainly the company is not doing well. Revenue, earnings and cash flow are all down in 2015. Revenue is down by 5.1%, earnings are down by 249% and cash flow is down by 98%. These are all in US$ as this is the reporting currency.

Debt ratios are not good. The Liquidity Ratio is quite low at 1.02. The Debt Ratio is 0.85. That means that the assets cannot cover the liabilities so there is a negative book value. This is never a good sign.

An interest item is that the cash on hand is higher than the stock price. Current stock price is $1.14 and cash on hand is $1.70 per share. However, the company is going through cash quite quickly, so this can only be a short term positive.

It is difficult to say what the stock price should be and therefore if it is a buy or what. The Price/Earnings per Share is negative. I cannot calculate a Graham Price as the Book Value is negative. Currently the Price/Book Value per Share is negative as the Book Value is negative. The stock has not dividends.

I get a 10 year median Price/Sales Ratio of 0.42, a low value. The current P/S Ratio is 0.11, so this would point to a good current stock price. I get a 10 year median Price/Cash Flow per Share Ratio of 7.24 and the current P/CF Ratio at 5.47 is some 18% lower. This also suggests a good current stock price.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold and Underperform recommendations. Most of the recommendations are a Hold. The consensus would be a Hold. The 12 month stock price is $1.05. This implies a total return of a capital loss of 7.85%. The high, low and mean targets are $1.65, $1.05 and $0.55. I am surprised there are no sell recommendations.

Not everyone is pleased with the Quebec government giving money to Bombardier. See the recent article by James Mennie of the Montreal Gazette. There is an interesting article about Bombardier by Alessandro Bruno in the Profit Confidential. There are a number of comments from analysts at Stock Chase.

I will have only one entry for this stock this year. However, I did a more complete report on this company in 2015 and you can see those blog entries here and here.

On my other blog I wrote yesterday about Dividend Cuts and the effect on my portfolio... learn more . The next stock I will write about will be ARC Resources Ltd. (TSX-ARX, OTC-AETUF)... learn more on Friday, February 26, 2016.

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. Its web site is here Bombardier Inc..

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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