Brookfield Business Partners LP (NYSE:BBU) is not the largest company, but it has attracted a lot of attention over the past few months as it has seen significant price fluctuations on the NYSE, rising to a high of $22.52 at one point before dropping to a low of $18.35. Depending on the share price fluctuations, it could open up opportunities for investors to enter the stock and buy at a lower price. The question to answer is whether Brookfield Business Partners’ current trading price of $18.35 reflects the actual value of this mid-cap stock, or is it currently undervalued, offering a buying opportunity? Let’s take a look at Brookfield Business Partners’ outlook and value based on the most recent financial data to see if there are any catalysts for a price movement.
Check out our latest analysis for Brookfield Business Partners
What opportunities does Brookfield Business Partners offer?
The stock price seems to be at a reasonable level at the moment according to our price-to-earnings model (this model compares the company’s price-to-earnings ratio to the industry average). In this example, we used the price-to-earnings ratio because we don’t have enough visibility to forecast cash flows. The stock’s 8.4x ratio is currently slightly below the 8.4x ratio of its peers. This means that if you bought Brookfield Business Partners today, you would pay a reasonable price. Also, if you think Brookfield Business Partners should trade at this level in the long term, there isn’t much upside to be gained compared to its peers. However, there may be an opportunity to buy in the future. This is because Brookfield Business Partners has a high beta (a measure of share price volatility), which means its price movements will be exaggerated compared to the overall market. If the market is bearish, the company’s stock price is likely to fall more than the overall market, creating a great buying opportunity.
What does the future hold for Brookfield Business Partners?
Future outlook is an important aspect when considering buying a stock, especially for investors looking for growth in their portfolio. While value investors would argue that it’s the intrinsic value relative to the price that matters most, a more compelling investment argument is high growth potential at a low price. With earnings expected to more than double in the coming years, the future looks very bright for Brookfield Business Partners. The stock’s prospects for increasing cash flows should support an increase in the stock’s valuation.
What this means for you
Are you a shareholder? It seems the market has already priced in BBU’s positive outlook, with the stock trading around its industry P/E multiple. But there are other important factors we didn’t consider today, such as management’s track record. Have these factors changed since the last time we looked at BBU? Would you have enough confidence to invest in this company if the stock price falls below the industry P/E ratio?
Are you a potential investor? If you’ve been keeping your eye on BBU, now may not be the most favorable time to buy, given that it’s trading at industry average share price levels. However, the positive outlook is encouraging for BBU, meaning it’s worth digging deeper into other factors, such as the strength of its balance sheet, to take advantage of the next price drop.
If we want to learn more about Brookfield Business Partners, we should also look at what risks it currently faces. For example, we’ve identified the following risks: 2 warning signs for Brookfield Business Partners (Number 1 doesn’t make much sense to us) You know that.
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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
