Is it a good company at a reasonable price? This company seems to be growing strongly. It has done well for shareholders since being list on the TSX. It does have debt problem but analyst seem to feel this will improve in the future. This makes buying this stock on the risky side. It is not really a dividend stock because of the very low dividend. Results of stock price testing is that the stock price is probably reasonable. I must admit that most analysts seem to think it is cheap.
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 last year analysts expected 2023 Revenue to be $9,785M at a 28% increase, but Revenue came in at 10, 033 a 31% increase. Analysts expected the Adjusted Earnings per Share (AEPS) to come in at $11.51, a 16% increase, but they came in at $12.05, a 21% increase. They also expected a good increase to Cash Flow per Share (CFPS) of $16.40, a 70% increase, but CFPS came in at $8.23, a 13% decrease. However, analyst think CFPS will be better in 2024 at $18.70. Note that the financial year end January 31 each year, so I am reviewing January 31, 2023 financials.
Generally, growth is good. The exception seems to be in Cash Flow. See chart below.
| Year | Item | Tot. Growth | Per Year |
|---|---|---|---|
| 5 | Revenue Growth | 123.62% | 17.46% |
| 5 | AEPS Growth | 406.30% | 38.32% |
| 5 | Net Income Growth | 215.06% | 25.80% |
| 5 | Cash Flow Growth | 25.22% | 4.60% |
| 5 | Dividend Growth | 166.67% | 21.67% |
| 5 | Stock Price Growth | 118.31% | 16.90% |
| 10 | Revenue Growth | 246.43% | 13.23% |
| 10 | AEPS Growth | 744.85% | 23.79% |
| 10 | Net Income Growth | 624.75% | 21.90% |
| 10 | Cash Flow Growth | 46.02% | 3.86% |
| 5 | Dividend Growth | 166.67% | 21.67% |
| 10 | Stock Price Growth | 362.43% | 16.55% |
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 2022, after 9 years you would have received $77.18 in dividends. The stock would be worth $3,509.82. Your total return would have been $3,587.09. This is a total return would be a loss of 15.03% per year with 14.65% from capital gain and 0.38% from dividends.
| Cost | Tot. Cost | Shares | Years | Dividends | Stock Val | Tot Ret |
|---|---|---|---|---|---|---|
| $30.15 | $1,025.10 | 34 | 9 | $77.18 | $3,509.82 | $3,587.00 |
The current dividend yield is low with dividend growth good at the moment. The dividend yield is low (below 2%) at just 0.72%. The 5, 6 and historical dividend yields are 0.69%, 0.66% and 0.66%. Dividends have been paid for 6 years. The dividend growth has been good with growth at 33% per year for the past 5 years. However, the last dividend increase was for the financial year of 2024 and was for 12.5%.
The Dividend Payout Ratios (DPR) are good and low. The DPR for 2023 for Earnings per Share (EPS) is 6% with 5 year coverage at 7%. The DPR for 2023 for Adjusted Earnings per Share (AEPS) is 5% with 5 year coverage at 7%. The DPR for 2023 for Cash Flow per Share (CFPS) is 5% with 3 year coverage at 3%. The DPR for 2023 for Free Cash Flow (FCF) is 10% with 3 year coverage at 10%.
| Item | Cur | 5 Years |
|---|---|---|
| EPS | 6.00% | 6.70% |
| AEPS | 5.31% | 6.93% |
| CFPS | 2.99% | 3.08% |
| FCF | 9.62% | 9.99% |
Some Debt Ratios are currently a problem, but analysts expect they will improve greatly over the next two years. The Long Term Debt/Market Cap Ratio for 2023 is 0.34 and currently is 0.35. Both are low and good. The Liquidity Ratios are a bit low at 1.36 for 2023 and 1.11 currently. However, add in Cash Flow after dividends and they are 1.59 and 1.54, respectively.
The Debt Ratios are too low at 1.09 for 2023 and better, but still low at 1.13 currently. This ratio needs to be 1.50 or higher. The Leverage and Debt/Equity Ratios are far to high at 11.97 and 10.97 for 2023 and 8.52 and 7.52 currently. These ratios should be below 3.00 and 2.00, so this is a problem. However, the company until recently had a negative Book Value until recently and analysts expect these ratios to good by January 2025 financials.
| Type | Year End | Ratio Curr |
|---|---|---|
| Lg Term R | 0.34 | 0.35 |
| Intang/GW | 0.09 | 0.09 |
| Liquidity | 1.36 | 1.11 |
| Liq. + CF | 1.59 | 1.54 |
| Liq. CF WC | 2.00 | 1.54 |
| Debt Ratio | 1.09 | 1.13 |
| Leverage | 11.97 | 8.52 |
| D/E Ratio | 10.97 | 7.52 |
The Total Return per year is shown below for years of 5 to 8 to the end of 2022. 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. |
|---|---|---|---|---|---|
| 2017 | 5 | 33.00% | 17.77% | 17.16% | 0.62% |
| 2013 | 8 | 15.03% | 14.65% | 0.38% |
The 5-year low, median, and high median Price/Earnings per Share Ratios are 8.99, 12.88 and 16.77. The corresponding 10 year ratios are 9.74, 14.15 and 20.85. The corresponding historical ratios are the same as the 10 year ratio of 9.74, 14.15 and 20.85. The current P/E Ratio is 7.45 based on a stock price of $97.62 and EPS estimate for 2024 of $13.10. The current ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I also have Adjusted Earnings per Share (AEPS) data. The 5-year low, median, and high median Price/Adjusted Earnings per Share Ratios are 8.84, 10.35 and 16.86. The corresponding 10 year ratios are 9.07, 13.15 and 17.04. The current P/AEPS Ratio is 7.54 based on a stock price of $97.62 and AEPS estimate for 2024 of $12.94. The current ratio is below the low ratio of the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $54.27. The 10-year low, median, and high median Price/Graham Price Ratios are 14.00, 42.34 and 31.84. The current P/GP Ratio is 1.80 based on a stock price of $97.62. The P/GP Ratios are not valid because this company had a negative book value over a number of years and it is not possible to calculate a valid P/GP Ratio with a negative book value. The current P/GP is rather high. A normal median P/GP Ratio is around 1.00. A value above 1.20 is considered high.
I get a 10-year median Price/Book Value per Share Ratio that is negative and so invalid. The current P/B Ratio is 9.65 and that is very high. Generally speaking, ratios of between 1.50 and 3.00 are reasonable. The trouble with this measurement on this stock is the series of negative Book Values that the company has experienced.
I also have Book Value per Share estimate for 2024 of $16.80. This implies a book value of $782M and a P/B Ratio of 5.81 with a stock price of $97.62. This ratio is also far too high. The P/B Ratio for 2026 could be 2.28 with a Book Value per Share of $42.80 and a stock price of $97.62. The P/B Ratio for 2026 is reasonable.
I get a 10-year median Price/Cash Flow per Share Ratio of 7.97. The current P/CF Ratio is 5.22 based on Cash Flow per Share estimate of $18.70, Cash Flow of $1,445M and a stock price of $97.62. The current ratio is 35% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap. Problem is that analysts believe that this company will be making much more in cash flow in the future. The estimate given is 122% above the cash flow for 2023.
I get an historical median dividend yield of 0.66%. The current dividend yield is 0.74% based on a stock price of $97.62 and dividends of $0.72. The current dividend yield is 12% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 6 year median dividend yield of 0.66%. The current dividend yield is 0.74% based on a stock price of $97.62 and dividends of $0.72. The current dividend yield is 12% above the historical median 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 0.82. The current P/S Ratio is 0.75 based on Revenue estimate for 2024 of $10,093M, Revenue per Share of $130.66 and a stock price of $97.62. The current ratio is 9% 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. The dividend yield tests say this and it is confirmed by the P/S Ratio tests. I know that some tests say the stock price is cheap, but there are problems with a number of tests due to the fact that the company had a negative book value for a number of years.
When I look at analysts’ recommendations, I find Strong Buy (10), Buy (8) and Hold (2). The consensus would be a Strong Buy. The 12 months stock price consensus is $137.28 with a high of $190.00 and low of $99.00. The consensus stock price of $137.28 implies a total return of 41.36% with 40.63% from capital gains and 0.74% from dividends.
The two analysts’ recommendations on Stock Chase for 2023, rate it as a Buy. Stock Chase gives this stock 4 stars out of 5. It is on the Money Sense dividend list. Robin Brown on Motley Fool thinks this company is a cheap growth stock. Vishesh Raisinghani on Motley Fool says you should keep an eye on this underrated manufacturing stock. I got the Motley Fool items via Yahoo Finance as the Canadian Motley Fool site does not seem to be working currently. The company issued a Press Release via Newswire about their year-end results for January 2023 . The company put out a Press Release on Newswire about its second quarter of 2024 results.
Simply Wall Street via Yahoo Finance thinks this stock is a good one to follow. Simply Wall Street has 1 warning of has a high level of debt.
BRP 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. At the end of fiscal 2023, the company marketed its products through a network of more than independent dealers and distributors in about 130 countries. 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 29, 2023 around 5 pm. Tomorrow on my other blog I will write about Planning Retirement .... learn more on Thursday, September 28, 2028 around 5 pm.
This blog is meant for educational purposes only and is not to provide investment advice. I am not a licensed professional investment advisor. 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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