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.
When I was updating my spreadsheet, I noticed that the estimates from Market Screener seemed to make no sense. They give Revenue for 2021 as $34,730M, a 45% drop and it gets worse for 2022 and 2023. Market Screener also gives EPS with loss in 2021 of $0.52, then losses of $1.70 and $2.36.
TD Bank estimates for EPS is different at $2.20, then $3.22 and $4.51. These EPS make more sense as the 12 month EPS to the end of the second quarter is $1.77. In the six months to the end of second quarter of last year there was a loss of $0.26. This year, there is a profit of $1.26. Also, the Net Income estimates are all positive at $4,357M, $5,110M and $5,757M. Using the current number of outstanding shares, the EPS would be$2.89, $3.39 and $3.82.
The other thing is I follow 9 officers and directors of BAM. Of them 6 decreased their holdings over the past year, with 5 of them decreasing them from 18% to 28%. Two increased their holding, but by only 1.5% and 1%. The last one had no shares and bought some. Ink shows Net Insider Selling at $50M and.05% of the outstanding shares. You have to wonder what is going on.
I have been following this stock for 7 years and this is the lowest Net Insider Selling I have seen. For example, last year there was $70M of insider selling at 0.09% of outstanding shares. In 2019 there was $86M of Net Insider Selling for 0.11% of the outstanding shares. Most stock I follow of NIS at around 0.01%.
The dividend yields are low with dividend growth moderate. Dividends are paid in US$. The current dividend yield is low (below 2%) at 0.90%. The dividends were increased over the past 5 year at a moderate rate (8% to 14% ranges) at 8.75% per year. The last dividend increase was made in 2021 and it was for 8.3%.
The Dividend Payout Ratios (DPR) are fine. The DPR for EPS for 2020 cannot be calculated because of an earnings loss. The 5 year coverage is 35%. The DPR for CFPS for 2020 is 8.7% with 5 year coverage at 10.7%. DPR for Free Cash Flow is 24% with 5 year coverage at 31%. However, sites do not agree on what FCF is.
Debt Ratios are fine. Because this is a financial institution, we need to look to see if their assets can cover the debt produced for those assets. The Mortgage/Investment Ratio is fine at 0.89. The Liquidity Ratio is not important for financials, although I calculate it and it is 1.12 for 2020. The Debt Ratio for 2020 is good at 1.55. The Leverage and Debt/Equity Ratios are 2.80 and 1.80.
The Total Return per year is shown below for years of 5 to 33 to the end of 2020 in CDN$. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 6.94% | 14.23% | 12.78% | 1.46% |
| 2010 | 10 | 10.25% | 15.88% | 13.48% | 2.40% |
| 2005 | 15 | 7.61% | 12.85% | 10.57% | 2.28% |
| 2000 | 20 | 8.03% | 19.71% | 15.57% | 4.14% |
| 1995 | 25 | 6.42% | 18.49% | 14.35% | 4.13% |
| 1990 | 30 | 5.32% | 14.25% | 11.15% | 3.09% |
| 1987 | 33 | 5.90% | 12.19% | 9.60% | 2.58% |
The Total Return per year is shown below for years of 5 to 33 to the end of 2020 in US$. 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 chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | 8.75% | 16.18% | 14.69% | 1.49% |
| 2010 | 10 | 7.58% | 12.99% | 10.72% | 2.26% |
| 2005 | 15 | 6.97% | 12.19% | 9.80% | 2.38% |
| 2000 | 20 | 9.00% | 21.39% | 16.55% | 4.84% |
| 1995 | 25 | 6.73% | 18.94% | 14.68% | 4.26% |
| 1990 | 30 | 5.00% | 13.71% | 10.81% | 2.90% |
| 1987 | 33 | 5.97% | 12.36% | 9.67% | 2.69% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 14.21, 18.65 and 22.97. The corresponding 10 year ratios are 11.70, 12.86 and 14.07. The corresponding historical ratios are 11.14, 12.73 and 15.18. The current P/E Ratio is 26.37 based on EPS estimate for 2021 of $2.20 (from TD WebBroker) and a stock price of $72.40. The current ratio is above the 10 year high median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
I get a Graham Price of $37.81. The 10 year low, median, and high median Price/Graham Price Ratios are 0.81, 0.92 and 1.02. The current P/GP Ratio is 1.92 based on a stock price of $72.40. The current ratio is above the high 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This is in CDN$.
I get a 10 year median Price/Book Value per Share Ratio of 1.34. The current P/B Ratio is 3.16 based on a Book Value of $27,925M, Book Value per Share of $18.53 and a stock price of $58.49. The current ratio is 136% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get a 10 year median Price/Cash Flow per Share Ratio of 9.95. The current P/CF Ratio is 18.45 based on Cash Flow per Share estimate for 2021 of $3.17, Cash Flow of $4777M, and a stock price of $58.49. The current ratio is 85% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get an historical median dividend yield of 2.08%. The current dividend yield is 0.89% based on dividends of $0.52, and a stock price of $58.49. The current yield is 57% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
I get a 10 year median dividend yield of 1.47%. The current dividend yield is 0.89% based on dividends of $0.52, and a stock price of $58.49. The current yield is 39% below the historical dividend yield. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$.
The 10 year median Price/Sales (Revenue) Ratio is 1.09. The current P/S Ratio is 2.56 based on Revenue estimate for 2021 of $34,370M, Revenue per Share of $22.81 and a stock price of $58.49. The current ratio is 136% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive. This testing is in US$. You will get a similar result in CDN$. However, as I have stated above, I do not think that the Revenue estimate make any sense as this shows a drop of 45%.
The 10 year median Price/Sales (Revenue) Ratio is 1.09. The current P/S Ratio is 1.29 based on Revenue for the last 12 months of $68,306M, Revenue per Share of $45.33 and a stock price of $58.49. The current ratio is 19% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable but above the median. It is almost to the expensive range. This testing is in US$. You will get a similar result in CDN$.
Results of stock price testing is that the stock price is probably expensive. I see a problem with using the estimates for Revenue. However, previously the results in using the last 12 months data there has also been problems. So, I am discounting the P/S Ratio tests. The Dividend yield tests show that the stock price is relatively expensive. The other tests show the same thing. In any event, the P/S Ratio tests might confirm the dividend yield test. I will go with the stock price being expensive.
Last year I thought the stock price was reasonable, but a bit on the high side. The stock price was $44.52 then. The 12 month stock price consensus last year was $46.98 ($35.75 US$). This implies a total return of 6.93% with 1.42% from dividends and 5.52% from capital gains. Since last year, the stock price has gone up some 62%.
Is it a good company at a reasonable price? I would think that the stock is expensive. What I do not like about this stock is that there is a lot of complexity in what they are doing. This year, some of the estimates given for the stock make no sense to me. I can find no reason for the values given.
I looked at the total return over a number of years. For P/S Ratio and P/E Ratio, the lower the ratio the cheaper the stock. For yield, the higher the yield, the cheaper the stock. In the chart below you can see that the beginning P/E Ratios for good returns are lower than today. This is the same with P/S Ratio. Also, the beginning yield was higher than today.
In the following chart the total return for the 10 years to December 31, 2020 is 15.88%. The beginning yield was high at 1.56%, and the P/S Ratio and the P/E Ratio were relatively low at 1.70 and 14.29. Does this chart change my opinion of the stock price? It does not. Also, over the years I have tracked this stock there has been a lot of changes in direction and mergers, so I do wonder how good the older values are for using today.
| # Years | Total Ret | Beg P/E | Beg P/S | Beg Yield |
|---|---|---|---|---|
| 5 | 14.23% | 13.73 | 1.50 | 1.53% |
| 10 | 15.88% | 14.29 | 1.70 | 1.56% |
| 15 | 12.85% | 8.23 | 1.65 | 1.76% |
| 20 | 19.71% | 6.44 | 1.58 | 4.51% |
| 25 | 18.49% | 8.84 | 7.06% | |
| 30 | 14.25% | 5.89% | ||
| 33 | 12.19% | |||
| current | 26.37 | 2.56 | 0.90% |
When I look at analysts’ recommendations, I find Strong Buy (4), Buy (6) and Hold (3). The consensus would be a Buy. The 12 month stock price is $69.55 ($55.22 US). This implies a total loss of 3.04% with a capital loss of 3.94% and dividends of 0.90%. A consensus of a Buy and a loss also makes no sense.
Analysts on Stock Chase really like this stock and certainly feel it is a buy. Jed Lloren on Motley Fool also likes this stock, especially to hold for the long term and feels they can afford to up their dividends soon. The executive summary on Simply Wall Street gives this stock 3 stars out of 5 and lists 4 risks. A writer on Simply Wall Street says that EPS has grown at 15% per year which is untrue and even their chart shows this. There has been some recent insider buying. Debasis Saha at Insider Monkey says this stock is not among the 30 most popular stocks among Hedge Funds.
Brookfield Asset Management Inc owns and manages commercial property, power, and infrastructure assets. Its investment focus includes Real Estate, Infrastructure, Renewable Power and Private Equity. Brookfield has the greatest amount of assets in Real Estate and generates the most revenue through Private Equity. Located around the world, its assets are concentrated in the United States, Canada, Brazil, and Australia. 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, October 20, 2021 around 5 pm. Tomorrow on my other blog I will write about RioCan REIT .... learn more on Tuesday, October 19, 2021 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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