Should You Buy Brookfield Asset Management Inc (TSE:BAM.A)?

Today we're going to take a look at the well-established Brookfield Asset Management Inc (TSE:BAM.A). The company's stock saw a decent share price growth in the teens level on the TSX over the last few months. As a large-cap stock, it seems odd Brookfield Asset Management is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s examine Brookfield Asset Management’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View out our latest analysis for Brookfield Asset Management

What is Brookfield Asset Management worth?

Brookfield Asset Management is currently overpriced based on my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Brookfield Asset Management’s ratio of 17.73x is above its peer average of 12.44x, which suggests the stock is overvalued compared to the Capital Markets industry. Another thing to keep in mind is that Brookfield Asset Management’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Brookfield Asset Management generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Brookfield Asset Management, it is expected to deliver a highly negative revenue growth next year, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? If you believe BAM.A is currently trading above its peers, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on BAM.A for a while, now may not be the best time to enter into the stock. Its price has risen beyond its industry peers, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Brookfield Asset Management. You can find everything you need to know about Brookfield Asset Management in the latest infographic research report. If you are no longer interested in Brookfield Asset Management, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.