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

Brookfield Asset Management Inc (TSX:BAM.A) had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of CA$52.51 to CA$56.39. However, is this the true valuation level 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. Check out 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. 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 90.28x is above its peer average of 12.67x, which suggests the stock is overvalued compared to the capital markets industry. 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.

Can we expect growth from Brookfield Asset Management?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extreme expected decline in the top-line over the next couple of years, near-term growth is certainly not a driver of a buy decision. Even with a larger decline in expenses, it seems like high uncertainty is on the cards for Brookfield Asset Management.

What this means for you:

Are you a shareholder? If you believe Brookfield Asset Management 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 risk from a negative growth outlook, 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 tabs on Brookfield Asset Management for some time, 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.