Bombardier Inc.

Sound bite for Twitter and StockTwits is: High risk stock. Any company connected with Airplanes is high risk and can be quite volatile at times. This not only applies to companies that make airplanes, but also Air Travel companies. This company is probably relatively cheap but it is a risk. 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.

When I look at my total return on this stock, it is rather shocking. I am surprise I have done so well at a total return of $10.86% per year since I bought it in 1987. I just expected that it would not be a winner. However, there are a lot of dividends involved. The total return is made up of 5.07% in capital gains and 5.79% in dividends. So the total return might not be what is expected.

Dividends have covered my stock price by 319%. Dividends have been an off and one affair with this company. For my stock, dividends were paid from purchase in 1987 to 2004. They were cut until 2009 and then paid from paid from 2009 to 2014 when they were cut again. This is a bit of a problem for me as I live off my dividends.

This may not be the best stock to hold in a portfolio, but it probably has not done much harm either. If you have a diversified portfolio buying a few duds is probably not going to much harm. It would seem from what I have read that doing a lot of trading is far more harmful to a portfolio that buying stock and holding on to them through thick and thin.

This company currently has a debt is a problem. The debt itself did not so much balloon but the ratio to the market cap of the stock did. In 2014 the debt was $7,627M with a ratio to market cap of 1.22. In 2015 the debt was up almost 17% to 8,908 but the ratio to market cap was 4.13. In 2016 the debt declined slightly by some 1.9%, with the ratio to market cap now at 2.42. Any Debt/Market Cap Ratio above 1.00 is a concern. It was last below 1.00 in 2013. But as you can see the big part of the Debt/Market Cap ratio has to do more with the volatility of the stock price.

For the Price/Earnings Ratios, the 5 and 10 year values do not make much sense because of years of earnings losses, so I will go right to the historical ratios. The low, median and high median P/E Ratios are 11.21, 15.47 and 19.79. The P/E Ratio is negative for 2017 as the earnings are expected to be negative. The P/E Ratio for 2018 is 60.99 based on a 2018 EPS estimate of $0.04 and a stock price of $2.40 CDN$. The Ratio of 2019 is 14.08 based on a 2019 EPS estimate of $0.17 and a stock price of $2.40 CDN$. There is not much to work with here. However, it would appear that the stock price is relatively cheap.

I cannot do a Graham price test as the Book Value is negative. I cannot do any stock price testing using the Price/Book Value per Share ratio because of the negative Book Value. There are no dividends currently so I cannot do any stock price testing using dividend yield.

The 10 year median P/S Ratio is 0.42 US$. The current P/S Ratio is 0.25 using 2017 Revenue estimate of $16738M, Revenue per Share estimate of $7.45 and a stock price of $1.84 in US$. The current P/S Ratio is some 41% lower than the 10 year median. This stock price testing suggests that the stock price is relatively cheap. I am doing this in US$ as the company reports in US$ so the testing is more accurate in US$.

The 10 year median Price/Cash Flow per Share ratio is 8.47 US$. The current P/CF Ratio is 16.73 based on CFPS of estimate of $0.11 and a stock price of $1.84 US$. The current P/CF Ratio is some 97% above the 10 year median. However, CFPS is expected to improve in 2018 with a CFPS estimate of $0.26 US$. This gives a ratio of 7.08 US$. This testing suggests that the stock price might be relatively reasonable.

When I look at analysts' recommendations I find Strong Buy, Buy, Hold and Underperform recommendations. Most of the recommendations are Hold recommendations. The consensus recommendation is a Buy. The 12 month stock price is $2.14 US$ or $2.81 CDN$. This implies a total return of 16.95% with it all from capital gains.

Andrew Walker of Motley Fool thinks the heavy debt load, ongoing difficulties in the rail group and a weak business jet market are significant concerns. Reuters on the Financial Post says that Bombardier Inc. reported a wider-than-expected fourth-quarter loss as revenue declined. According to Brent Sawyer on Sports Perspective Desjardins had boosted its target price from C$2.25 to C$2.75. See what analysts are saying about this stock on Stock Chase. They are mostly positive.

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.

The last stock I wrote about was about was Emera Inc. (TSX-EMA, OTC-EMRAF)... learn more . The next stock I will write about will be Canadian Real Estate Investment Trust (TSX-REF.UN, OTC- CRXIF)... learn more on Monday, February 27, 2017 around 5 pm.

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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.