At $49.32, Is It Time To Buy Brookfield Asset Management Inc (TSE:BAM.A)?

Let's talk about the popular Brookfield Asset Management Inc (TSX:BAM.A). The company's shares saw its share price hover around a small range of CA$47.99 to CA$52.47 over the last few weeks. But is this actually reflective of the share value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Brookfield Asset Management’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Brookfield Asset Management

What's the opportunity in Brookfield Asset Management?

According to my relative valuation model, the stock is currently overvalued. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 28x is currently well-above the industry average of 14.13x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Brookfield Asset Management’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Brookfield Asset Management look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 over the next few years, 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 should trade below its current price, 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 track record of its management. 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.