Brookfield Business Partners (NYSE:BBU) Valuation in Focus After Third Quarter Earnings Miss

Brookfield Business Partners (NYSE:BBU) just released its third quarter earnings, revealing a significant drop in both sales and profitability compared to a year ago. This shift is likely catching investors' attention right now.

See our latest analysis for Brookfield Business Partners.

Despite the dip in sales and profits this quarter, Brookfield Business Partners’ share price has surged 22.5% over the past 90 days and is up a robust 37.5% year-to-date. The one-year total shareholder return of 34.8% underscores that, while recent results have raised eyebrows, momentum is still strong and long-term investors remain well ahead.

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With the stock up sharply despite weaker earnings, is Brookfield Business Partners now trading at a bargain? Or are investors already factoring in the company’s potential rebound and future growth into today’s price?

Price-to-Sales Ratio of 0.2x: Is it justified?

Brookfield Business Partners is trading at a price-to-sales (P/S) ratio of just 0.2x, which is dramatically lower than both its peer group and the wider industry. With a last close of $32.58, this makes the stock look extremely cheap relative to its sales.

The price-to-sales ratio tells investors how much they are paying for every dollar of company revenue. For a diversified industrial holding like Brookfield Business Partners, the P/S ratio is often used to compare valuations across companies with low or negative earnings or in turnaround situations.

At just 0.2x, Brookfield Business Partners’ multiple is far below the peer average of 1.2x and the global industrials sector average of 0.8x. This suggests the market is severely discounting near-term profit challenges, but also might be underestimating the value of the company’s vast operations and its ability to recover losses.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Sales of 0.2x (UNDERVALUED)

However, continued net losses and uncertain revenue growth could quickly shift sentiment if profitability does not improve in upcoming quarters.

Find out about the key risks to this Brookfield Business Partners narrative.

Another View: What Does Our DCF Model Say?

While Brookfield Business Partners appears undervalued based on its low price-to-sales ratio, our DCF model offers a different perspective. According to the SWS DCF model, the stock is trading well below its estimated fair value, indicating a potentially undervalued opportunity from a long-term cash flow standpoint. However, does this forecast align with real business turnarounds?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Brookfield Business Partners for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 905 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Brookfield Business Partners Narrative

If you think differently about Brookfield Business Partners or want to investigate the numbers yourself, you can build your own perspective in just a few minutes. Do it your way

A great starting point for your Brookfield Business Partners research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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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