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What Does Brookfield Business Partners L.P.'s (NYSE:BBU) Share Price Indicate?

Brookfield Business Partners L.P. (NYSE:BBU), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$22.52 at one point, and dropping to the lows of US$18.35. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Brookfield Business Partners' current trading price of US$18.35 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Brookfield Business Partners’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Brookfield Business Partners

What's The Opportunity In Brookfield Business Partners?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 8.4x is currently trading slightly below its industry peers’ ratio of 8.4x, which means if you buy Brookfield Business Partners today, you’d be paying a reasonable price for it. And if you believe that Brookfield Business Partners should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Brookfield Business Partners’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Brookfield Business Partners look like?

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earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to more than double in the upcoming, the future appears to be extremely bright for Brookfield Business Partners. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in BBU’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at BBU? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

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Are you a potential investor? If you’ve been keeping an eye on BBU, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for BBU, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Brookfield Business Partners, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for Brookfield Business Partners (1 doesn't sit too well with us) you should be familiar with.

If you are no longer interested in Brookfield Business Partners, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.