Is it a good company at a reasonable price? I think that the price is currently reasonable. Personally, I do not like companies with a negative Book Value. It says that the possible breakup price of the company is negative. So, this stock is risky, but analysts maybe right that it will do great.
I do not own this stock of BRP Inc (TSX-DOO, OTC-DOOO). Robin Speziale, author of Market Masters and Capital Compounders had mentioned this stock in Capital Compounders, Table 3 (page 93 in my copy) as a possible next Capital Compounder.
When I was updating my spreadsheet, I noticed that for the first time since 2013, this company has a positive value for the Book Value. The financial year ends at January 31 each year so I am reviewing the January 31, 2022 year end.
If you had invested in this company in December 2013, for $1,025.10 you would have bought 34 shares at $30.15 per share. In December 2021, after 8 years you would have received $55.42 in dividends. The stock would be worth $3,767.20. Your total return would have been $2,822.62.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $30.15 | $1,025.10 | 34 | 8 | $55.42 | $3,767.20 | $3,822.62 |
The dividend yields are low with dividend growth good. The dividend yield is low (below 2%) at just 0.73%. Dividends have only been paid for some 4 years and the 4 year and historical median dividend yield is also low at 0.64%. The dividend growth is currently good (15% and above) at 19% per year over the past 4 years.
The Dividend Payout Ratios (DPR) are good. The DPR for EPS for 2022 is 6% with 5 year coverage at 7%. The DPR for Adjusted Earnings per Share (AEPS) for 2022 is 5% with 5 year coverage at 8%. The DPR for Cash Flow per Share (CFPS) for 2022 is 3% with 5 year coverage also at 3%. Different sites give different values for FCF.
Debt Ratios are poor because of a negative Book Value. The Long Term Debt/Market Cap Ratio is good and low at 0.21. The Liquidity Ratio is low at 1.02. If you add in Cash Flow after Dividends, it is good at 1.55. The Debt Ratio is below 1.00 at 0.97 as the stock has a negative book value. The book value turned positive this year and is at 1.00. This is low. The Leverage and Debt/Equity Ratios are negative because of the negative book Value.
The Total Return per year is shown below for years of 5 to 8 to the end of 2021. 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. |
|---|---|---|---|---|---|
| 2016 | 5 | 19.45% | 32.03% | 31.34% | 0.69% |
| 2013 | 8 | 17.97% | 17.67% | 0.30% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 9.42, 13.49 and 19.54. The corresponding 9 year and historical ratios are 10.07, 18.81 and 22.16. The current P/E Ratio is 7.78 based on a stock price of $87.90 and EPS estimate for 2023 of $11.30. The current ratio is below the low of the 9 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I have Adjusted Earnings per Share data. The 5-year low, median, and high median P/AEPS Ratios are 9.30, 13.32 and 17.34. The corresponding 9 year ratios are 10.01, 14.17 and 17.26. The current P/AEPS Ratio is 7.64 based on an AEPS estimate for 2021 of $11.51 and a stock price of $87.90. This is below the low of the 9 year median ratios. This stock price testing suggests that the stock price is relatively cheap.
I cannot really calculate a Graham Price because of the lack of a Book Value. The current P/GP Ratio is 16.13 based on a stock price of $87.90. This is a high value, but the Book Value is very low. This test is not much good.
I cannot do a Price/Book Value per Share Ratio test because of all the years with a negative Book Value.
I get a 10-year median Price/Cash Flow per Share Ratio of 7.95. The current P/CF Ratio is 5.36 based on Cash Flow per Share estimate for 2023 of $16.40, Cash Flow of $1,291M and a stock price of $87.90. The current ratio is 33% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a 4 year and historical median dividend yield of 0.64%. The current dividend yield is 0.73% based on a stock price of $89.70 and dividends of $0.64. The current dividend yield is 14% above the 4 year and historical dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
The 10-year median Price/Sales (Revenue) Ratio is 0.84. The current P/S Ratio is 0.71 based on Revenue estimate for 2023 of $9,785M, Revenue per Share of $124.29 and a stock price of $87.90. The current ratio is 16% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
Results of stock price testing is that the stock price is probably reasonable and below the median. The dividend yield test says this as does the P/S Ratio test. Other tests, that could be run say that the stock price is cheap.
When I look at analysts’ recommendations, I find Strong Buy (8), Buy (8) and Hold (1). The consensus would be a Strong Buy. The 12 month stock price consensus is $133.20. This implies a total return of 52.26% with 51.54% from capital gains and 0.73% from dividends.
The only remark on Stock Chase for 2022 is a Hold and analyst is waiting to see what happens. Stock Chase gives this stock 3 stars out of 5. It is not on the Money Sense list. Vineet Kulkarni on Motley Fool thinks this stock is well placed to outperform in the long term. Robin Brown on Motley Fool thinks this stock has a bright future. The company released on Newswire its fourth quarter results for 2022. The company released on newswire its second quarter of 2023 results.
Simply Wall Street via Yahoo Finance talks about this stock being undervalued. Simply Wall Street has 3 warnings of debt is not well covered by operating cash flow; high level of non-cash earnings and profit margins (8.5%) are lower than last year (12.8%).
BRP Inc designs, develops, manufactures, distributes, and markets snowmobiles, all-terrain vehicles, and personal watercraft under the Ski-Doo, Sea-Doo, Can-Am, and Lynx brand names. It also builds engines under the Rotax brand and offers clothing, parts, and accessories that cater to its core consumers. In 2018, BRP created a marine group. Its web site is here BRP Inc.
The last stock I wrote about was about was K-Bro Linen Inc (TSX-KBL, OTC-KBRLF) ... learn more. The next stock I will write about will be Linamar Corporation (TSX-LNR, OTC-LIMAF) ... learn more on Friday, September 30, 2022 around 5 pm. Tomorrow on my other blog I will write about Money Show Toronto 2022 .... learn more on Thursday, September 29, 2022 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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