Q: Looking at beginning a position in Brookfield, but am hesitant when looking at price relative to 52 week high, yield is low, and P/E is very high. Could you please outline the rational for your support in light of the foregoing which may or may not be relevant. Thanks
5i Research Answer:
We think investors should evaluate BN’s valuation based on the Price/Distributable earnings (referred to as DE). BN reports this number each quarter in the company’s press releases. BN is currently trading at 15.6x trailing-twelve-month DE, and DE is expected to compound at around 15% over the next few years.
It is true, that BN is trading at a 52-week high, but the low yield is mainly because the company chose to reinvest most of the earnings to grow the business. However, in terms of P/DE it still looks pretty cheap relative to other asset managers, we would not be surprised if BN keeps climbing higher from here given the discount in valuation.