Friday, March 1, 2019

Bombardier Inc

Sound bite for Twitter and StockTwits is: Cheap Industrial Stock. It would appear that the stock price is relatively cheap. The company has a huge vulnerability because of awful debt ratios. There is minimal insider buying. See my spreadsheet on Bombardier Inc.

I do not own this stock of Bombardier Inc (TSX-BBD.B, OTC-BDRBF) but I used to. 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 did not sell. I lost hope by 2017, so I sold. I made 11.08% per year.

When I was updating my spreadsheet, I noticed the company still is not doing well. Analysts still have hope that revenue, earnings, and cash flow will improve.

This company has had dividends during some periods. In fact, I made half my return in dividends. I did make a total return of 11.08% per year, but 5.69% was in capital gains and 5.39% was in dividends.

The Long Term Debt/Market Cap Ratio is really high at 2.60. Any ratio about 1.00 is really high. The Liquidity Ratio for 2018 is 1.00. If you had in cash flow it becomes 1.04. Current assets just barely cover current liabilities. The Debt Ratio is worse at 0.86. This means that assets cannot cover liabilities and book value is negative. Leverage and Debt/Equity Ratios cannot be calculated because of the negative book value. This is a huge vulnerability for the company.

The Total Return per year is shown below for years of 5 to 32 to the end of 2018 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See charts below.

This stock crashed after the 2001 bear market and recession and has never recovered.

From Years Div. Gth Tot Ret Cap Gain Div.
2013 5 0.00% -14.68% -15.13% 0.45%
2008 10 0.00% -4.14% -6.08% 1.94%
2003 15 0.00% -5.73% -6.96% 1.23%
1998 20 0.00% -6.99% -8.21% 1.21%
1993 25 0.00% 1.86% -1.05% 2.91%
1988 30 0.00% 7.90% 2.98% 4.92%
1986 32 0.00% 5.35% 1.71% 3.64%

The Total Return per year is shown below for years of 5 to 29 to the end of 2018 in US$.

From Years Div. Gth Tot Ret Cap Gain Div.
2013 5 0.00% -19.09% -19.51% 0.41%
2008 10 0.00% -4.71% -7.08% 2.37%
2003 15 0.00% -5.66% -7.23% 1.56%
1998 20 0.00% -6.30% -7.79% 1.49%
1993 25 0.00% 1.82% -1.20% 3.02%
1989 29 0.00% 6.57% 2.10% 4.48%

The 5 year low, median, and high median Price/Earnings per Share Ratios are -2.21, -2.29 and -3.37. The corresponding 10 year ratios are 6.40, 10.28 and 13.88. The historical ratios are 11.21, 15.47 and 19.79. The current P/E Ratio is 22.72 based on a stock price of $2.79 CDN$ and 2019 EPS estimate of $0.04 CDN$. This stock price testing suggests that the stock price is relatively expensive.

I cannot calculate a Graham Price is the Book Value is negative. I also cannot do the dividend yield test as there are no dividends. I cannot do the Price/Book Value per Share test as the Book Value is negative.

The 10 year median Price/Sales (Revenue) Ratio is 0.36 US$. The current P/S Ratio is 0.28 US$ based on 2019 Revenue estimate of $17,920 US$, Revenue per Share of $7.35US$ and a stock price of $2.12 US$. The current P/S Ratio is some 22% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.

Results of stock price testing is that the P/S Ratio test is the only valid test and it shows the stock as relatively cheap. The only other one I did was the P/E Ratio test, but the problem with that is that there has been a lot of years of earnings losses. All other tests could not be done because the book value is negative or because there are no dividends.

When I look at analysts’ recommendations, I find Strong Buy (4) and Buy (17) recommendations. The consensus would be a Buy. The 12 month stock price is $3.39 US$ or $4.47 CDN$. This implies a total return of 60% based on a current stock price of $2.79 CDN$ all from capital gains.

See what analysts are saying about this stock on Stock Chase. Most do not like the company. Andrew Button on Motley Fool says he is looking for a good entry point.. A writer on Simply Wall Street says this stock is undervalued by 48%. The Canadian Press via CTV News has an article about Bombardier finding work for their laid off workers. Esteban Duarte and Gowri Gurumurthy on Bloomberg says that Bombardier double the size of its Bond offering as it sold into a red-hot junk bond market.

Bombardier manufactures transportation solutions, from commercial aircraft and business jets to rail transportation equipment and related services. With a home office in Montreal, it has facilities and 74,000 employees operating in 28 countries. Its web site is here Bombardier Inc.

The last stock I wrote about was about was Home Capital Group (TSX-HCG, OTC-HMCBF) ... learn more. The next stock I will write about will be RioCan Real Estate (TSX-REI.UN, OTC-RIOCF) ... learn more on Monday, March 4, 2019 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. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.

1 comment:

  1. The stock price has been going down for so long .. What makes you think that it will miraculously start going the other way? One would have to be willing to lose a lot of money to buy this stuff .