Bombardier's valueHere is a simple fomula for Enterprise Value
EV= MC + Total Debt - Cash on hand or cash equivalents
If you use this common formula for Enterpise Value. Then you should be able to come with a share (SP) of what the shares of Bombardier should be trading at.
So Bombardier
Market Cap = $5B
Total Debt = $7.3B
Cash on Hand= $2.2B
So EV = $5B + $7.3B - $2.2B = $10.1B
I say that.
If the EV is at $10.1B. Then remember that if someone wants to take this company over (I'm not saying here they can because of Dual Share structure)? But if they can? They would pay the bomber's debt and the rest stay's with the Bomber, so that ($10.1B) would be Bombardiers take over value.
But the Share Price (SP) value is something totally different.
That's where the SP value of Bombardier is "what a willing Buyer is willing to pay a willing Seller for their shares" as 007 said, and "Supply + Demand".
Or as Nobody says. Right now we don't even KNOW, or have what 1 Years Financial Statements, to know what they'll look like for this company yet.
Or as club says. You can't value a company's SP when it so heavily manipulated such as the Bombardier shares.
I say that there are "rules of thumb" for predicting the SP. I've noticed it with Good Investment Grade Stocks.
This what I've noticed.
You can take the $10.1B and Divide it by the number of outstading shares (2.4B) both classes for the Bomber = the SP should be $4.20.
There are some catches here. We haven't got!!!!!
-Not even 1 year of Financial Statements to see the overall picture.
-Not even 1 year of EBITDA to see a trend in comparison to it's pears.
-Not even 1 year of +FCF to see what percentage of Sales we are netting.
-Not even 1 year of production to see a trend in delivery capabilities.
-Not even 1 year of Service Revenues to see a trend in Revenue stability.
-Not even 1 year Management with this Pure (Business Jet) Play.
So my conclusion is that the SP should be somewhere between $2 and $4 for the time being.
Why? Because of a lot of things. But I'm only going to mention a few.
-First, we are going to get the statements soon enough. If BBA did what they did in the past, and delivered 120 planes yearly? Then the revenues will be there
-Second, EBITDA is starting to show a positive trend. But there are a lot of Quarters ahead to see actual comparisons to pears.
-Small +FCF Quarters are starting to appear, but the yearly picture isn't clear yet. We're carrying big debt & the interest on it, is still huge, so only Q4 will shed light.
-Now that the pure play is on it's own. The production lines/price/inventory are not supported by cash of other divisions. I hope they can still deliver the 120 planes.
-Service revenues not available for the full year. But we put in tons of money in, and are getting some back, but the initial investment was/is heavy. Go profits Go.
-Management promise's are optimistic, and 1 full year guidence for Revenues, Planes, EBITDA, Service, and everything else is very optimistic.
Final conclusion:
I like this management. They've learned from the previous liars. They are optimistic because they know they can produce the 120 planes they promised. They know that they will use some $400M to shore up all the expenses this year for BBA, and are keeping powder dry in cash for that event. So I believe that they are on a learning curve, with many facets of running this pure play. They have runway this year. But that's it. After 2021 they will put the gloves on, get what they can in profits, to start working on paying the debts both current and long term. There are many places to invest in with this Pure Play.
Finally. If I was the Bombardier Family right now. I wouldn't sell for $2 a share to anybody. I would set my price at minimum $5 a share, and even then I wouldn't sell till 2025. Because if my management team predicts, that they can make $1.5B EBITDA and $500M in +FCF a year by 2025??? Then this company is worth at least about $15 to $20 Per SHARE. Why? Because at $5 a share the Market Cap will raise the EV by $6B, and if the +FCF is 500M/year. Think of the what it will do to the DEBT year every year. Or even R&D. Nothing beats effeciency.
So I think that the SP for this year should be $3, and will get there in Q3 towards the end of 2021. If not then Q4/21 for sure. Q3/21 should start to show the profit trend better as well, and the market makers will start to see the light. When the 120 planes are delivered, it will seal the deal on deliveries and Revenues. If in 2022 everything that management said is true? Then we should start to see the $4 in 2022. Not that we'll be Investment grade but the Stock Market investors (Banks, Investment managers, Funds will start to make the SP climb by buying shares.
JMHO of course. Use your own numbers for investing. These are only my projections.
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