- If you are wondering whether Brookfield Business Partners units are attractively priced right now, this article walks through what the current market price might be implying about value.
- The stock last closed at US$29.71, with returns of a 9.5% decline over 7 days, a 17.8% decline over 30 days, a 17.1% decline year to date, 33.5% over 1 year, 85.5% over 3 years, and 17.1% over 5 years. This gives a wide range of outcomes for investors to think about.
- Recent news coverage around Brookfield Business Partners has focused on its role as a global business services and industrials investor, along with ongoing portfolio activity within its various operating segments. Together, these headlines help frame why sentiment and unit price volatility can shift even when the underlying businesses progress on a different timetable.
- On Simply Wall St's 6 point valuation framework, Brookfield Business Partners scores a 6 out of 6. Next we will walk through the key valuation approaches behind that score, then finish with a way to put those numbers into a broader context.
Approach 1: Brookfield Business Partners Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes estimates of the cash Brookfield Business Partners could generate in the future and discounts those back to today to arrive at an intrinsic value per unit.
For Brookfield Business Partners, the latest twelve month free cash flow is about $2.0b. Simply Wall St uses a 2 Stage Free Cash Flow to Equity model, projecting cash flows out to 2035 using analyst estimates where available and then extrapolations. For example, projected free cash flow for 2035 is $2.8b, with each year in between stepping up from the current $2.0b base according to the model's growth assumptions.
After discounting those projected cash flows back to today, the model arrives at an estimated intrinsic value of about $109.83 per unit. Compared with the recent unit price of US$29.71, the DCF output suggests Brookfield Business Partners is trading at a 72.9% discount to this estimate, which points to a wide gap between modeled value and current market pricing.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Brookfield Business Partners is undervalued by 72.9%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.
Approach 2: Brookfield Business Partners Price vs Sales
For companies where earnings can be volatile, the P/S ratio is often a useful sense check because sales tend to be more stable than profits and are less affected by accounting choices. Investors usually look for a P/S level that lines up with what they think about a company’s growth potential and risk profile. Higher expected growth or lower perceived risk can support a higher “normal” P/S, while slower growth or higher risk usually points to a lower one.
Brookfield Business Partners currently trades on a P/S of 0.23x. That is well below the Industrials industry average of 0.85x and also below the peer group average of 1.99x. Simply Wall St’s Fair Ratio framework goes a step further by estimating what P/S might be reasonable for this specific business, based on factors like its growth outlook, profit margins, industry, market cap and risk profile. For Brookfield Business Partners, that Fair Ratio is 0.24x, which is very close to the current 0.23x.
On this basis, Brookfield Business Partners appears to be priced broadly in line with what the Fair Ratio suggests.
Result: ABOUT RIGHT
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Upgrade Your Decision Making: Choose your Brookfield Business Partners Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Narratives are simply your story about a company linked directly to your assumptions for future revenue, earnings, margins and fair value.
On Simply Wall St, a Narrative connects three pieces in one place: what you think is happening in Brookfield Business Partners business, the financial forecast that follows from that view, and the fair value you arrive at from those numbers.
You can create and compare Narratives on the Community page, where millions of investors share their views. You can then see at a glance whether each Narrative suggests Brookfield Business Partners fair value is above or below the current unit price and whether that points to a possible buy, hold or sell decision for them.
Because Narratives update automatically when new information such as earnings reports or major news is added to the platform, you are not locked into one view. You can quickly see how different investors might justify a wide range of fair values for Brookfield Business Partners using the same price chart but very different stories and assumptions.
Do you think there's more to the story for Brookfield Business Partners? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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