Brookfield Asset Management Inc.

Sound bite for Twitter and StockTwits is: Dividend Growth Financial. This stock seems to be overpriced. It does not matter if I use US$ or CDN$ as ratios are the same no matter what the currency used. In any test you either use CDN$ or US$. See my spreadsheet on Brookfield Asset Management Inc.

I do not own this stock of Brookfield Asset Management Inc. (TSX-BAM.A, NYSE-BAM). I used to own an earlier version of this stock as Hees International, then Edper Group and then EdperBrascan back in 1987 to 1999. This firm has a complicate structure. They have a management team and a board of directors, but also Managing Partners and Managing Directors.

What I noticed in updating my spreadsheet is that the EPS swings all over the place. The 5 and 10 year growth in EPS is EPS down by 4.3% and up by 2.0% per year. This looks bad. However, if you use the 5 year running averages you have growth of 13.6% and 9.6% per year. With this you are comparing the average for the 5 year period ending in 2016 with the 5 year periods ending in 2011 and 2006.

If earnings are volatile, it is better to look at 5 year running averages to get a sense if EPS are growing or not. This is in US$ terms. In this case, I feel that EPS are growing nicely and the 5 year running periods are a better judge of this growth.

The growth in CFPS is a bit different. The 5 growth is better than the 5 year running average 5 year growth. The CFPS has grown by 29.3% per year over the past 5 years. However, if you look at the 5 year growth using 5 year running average, the growth is at 9% per year. This is in US$ terms. In this case, the 5 year running average is a better indicator of growth and growth seems to be around 9% per year.

Shares have not increased much over the past 5 and 10 years. They are up by less than 1% per year over the past 5 and 10 years.

Has the stock made money for its Shareholders? The total return over the past 5 and 10 years to the end of 2016 is at 22.22% and 7.94% per year. The portion of this total return attributable to dividends is 3.39% and 2.07% per year. The portion of this total return attributable to capital gain is 18.83% and 5.87% per year.

If you had held this stock for the past 5, 10 or 15 years your dividend yield on your purchase price if you purchased the stock at a median price would be 3.32%, 2.67% or 16.46%. If you had held this stock for the past 5, 10 or 15 years your dividends would have paid for 21.15%, 26.75% or 192.72% of your purchase price if you purchased the stock at a median price.

The 5 year low, median and high median Price/Earnings per Share Ratios are 12.61, 14.02 and 15.44. The 10 year corresponding values are 12.69, 15.24 and 16.98. The historical ones are 11.14, 13.24 and 15.18. The current P/E Ratio is 92.66 based on a stock price of $53.22 CDN$ (41.70 US$) and 2017 EPS estimate of $0.57 CDN$ ($0.45 US$). This is because everyone expects EPS to be very low this year, dropping some 72% from 2016. This stock price testing suggests that the stock that the stock is relatively expensive.

Seems analysts do not expect the company to make much this year. EPS are expected to be better in 2018 but that only moves the P/E Ratio to 38.97. If you use the 12 month EPS to the end of the second period, which is $1.65 CDN$ you get a P/E of 32.32. The thing is that using the P/E Ratio to judge current price will not always give a clear picture.

I get a Graham Price of $19.60 CDN$. The 10 year low median and high median Price/Graham Price Ratios are 0.81, 0.91 and 1.02. The current P/GP Ratio is 2.72 based on a stock price of $53.22 CDN$. This stock price testing suggests that the stock that the stock is relatively expensive. The Graham Price also has the EPS estimate in its formula.

The 10 year median Price/Book Value per Share Ratio is 1.34 CDN$. The current P/B Ratio is 1.79 a value some 34% higher. The current P/B Ratio is based on a stock price of $53.22, Book Value of $28,501M, and BVPS of $29.73 CDN$. This stock price testing suggests that the stock that the stock is relatively expensive.

The current dividend yield is 1.34%. The historical median dividend yield is $2.48% US$. The current dividend yield is some 46% lower than the historical median. The current dividend yield is based on dividends of $0.56 US$ and a stock price of $41.70 US$. This stock price testing suggests that the stock that the stock is relatively expensive.

The 10 year median Price/Sales (Revenue) Ratio is 1.20 US$. The current ratio is 1.53 US$ based on 2017 Revenue estimate of $26,064 US$, Revenue per Share of $27.19 US$ and a stock price of $41.70 US$. The current P/S Ratio is some 28% higher than the 10 year median ratio. This stock price testing suggests that the stock is relatively expensive.

When I look at analysts' recommendations I find Buy (2) and Hold (1) recommendations. There are not many analysts following this stock. The 12 month stock price consensus is $41.49.US or $52.97 CDN$. This implies a total return of 0.87% with a capital loss of 0.47% and dividends of 1.34%. This is based on a current price of $52.33 CDN$ or $41.70 US$.

There is a wide spread of stock price consensus estimates with a high of $66.37 and a low of $34.04 CDN$ or a high of$52.00 and a low of $26.67 US$. The mean of these estimates is $41.49.US or $52.97 CDN$. 6 estimates are given.

Juan de la Hoz on Seeking Alpha. One comment on this analysis was "Our problem with BAM is that it relies so much on execution brilliance but we find the human factor the toughest risk to price in. One bad appointment could lose them 100s of millions." Jacob Donnelly of Motley Fool likes this company. Daryl Painter on Simply Wall Street looks at the ownership structure for this company. Tom Metcalf and Neil Weinberg of Bloomberg on the Financial Post talks a bit about the history of this company.

Brookfield Asset Management Inc. is a global alternative asset manager. The company has more than a 100-year history of owning and operating assets with a focus on property, renewable power, infrastructure and private equity. Brookfield offers a range of public and private investment products and services, and is co-listed on the New York, Toronto and Euronext stock exchanges. Partners Ltd owns 17%. Its web site is here Brookfield Asset Management Inc.

The last stock I wrote about was about was Molson Coors Canada (TSX-TPX.B, NYSE-TAP)... learn more. The next stock I will write about will be CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF)... learn more on Wednesday, November 8, 2017 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks November 2017... learn more on Tuesday, November 7, 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.

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