BPY does appear to be cheap. It is trading at record-lows and the stock has been punished in the recent downtrend. It is trading at only 0.3 times book value, at 0.7 times sales and 4.5 times earnings. It looks really, really cheap and it is rare to see a high-quality company beaten up so badly.
Why has it tanked? The company is highly exposed to retail. This is why the company disappointed with a dividend raise which was much lower than expected earlier this year? Why did it miss the mark? Retail was a drag on earnings and cash flow. It is important to note that this was before the pandemic hit. Over the past five years, revenue has grown but earnings have been on an almost steady decline.
If you look at the company's 5-year chart, you will see it has struggled to gain a footing. In fact, it traded sideways before beginning a downwards trend about 2-years ago. This drop is just a continuation of this downward trend.
Retail has been one of the hardest hit industries, and BPY is exposed. Can it rebound? Most certainly. However, we believe there are less risky options out there. In fact, we think BPY is the least attractive in the Brookfield family of companies. We much prefer BEP and BIP which operate in different industries. Parent company BAM is also a decent choice.
It may make for a short-term play, but long-term it is still facing a challenging retail environment. Back to the company's valuation, it will be interesting to see how results will pan out over the next few quarters. What looks cheap based on historical data, might no longer look cheap after a few bad quarters.
Mat