How Has Brookfield Asset Management Inc’s (TSE:BAM.A) Performed Against The Industry?

In this article, I will take a look at Brookfield Asset Management Inc’s (TSE:BAM.A) most recent earnings update (31 March 2018) and compare these latest figures against its performance over the past few years, along with how the rest of BAM.A’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.

Check out our latest analysis for Brookfield Asset Management

How Did BAM.A’s Recent Performance Stack Up Against Its Past?

BAM.A’s trailing twelve-month earnings (from 31 March 2018) of US$2.21b has jumped 80.92% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -2.01%, indicating the rate at which BAM.A is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is solely attributable to industry tailwinds, or if Brookfield Asset Management has seen some company-specific growth.

Over the last couple of years, Brookfield Asset Management top-line expansion has outpaced earnings and the growth rate of expenses. Though this brought about a margin contraction, it has lessened Brookfield Asset Management’s earnings contraction. Viewing growth from a sector-level, the Canadian capital markets industry has been growing, albeit, at a unexciting single-digit rate of 6.11% in the prior year, and a substantial 20.06% over the last five years. This growth is a median of profitable companies of 25 Capital Markets companies in CA including Clarke, Northfield Capital and Canaccord Genuity Group. This suggests that whatever tailwind the industry is profiting from, Brookfield Asset Management is able to amplify this to its advantage.

TSX:BAM.A Income Statement Export August 1st 18
TSX:BAM.A Income Statement Export August 1st 18
In terms of returns from investment, Brookfield Asset Management has not invested its equity funds well, leading to a 7.24% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.07% is below the CA Capital Markets industry of 9.19%, indicating Brookfield Asset Management’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Brookfield Asset Management’s debt level, has declined over the past 3 years from 2.72% to 1.76%.

What does this mean?

Though Brookfield Asset Management’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Brookfield Asset Management to get a more holistic view of the stock by looking at:

  1. Financial Health: Is BAM.A’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.