BUSINESS
Brookfield Renewable Partners L.P. owns a portfolio of renewable power generating facilities primarily in North America, Colombia, Brazil, Europe, India, and China. The company generates electricity through hydroelectric, wind, solar, distributed generation, pumped storage, cogeneration, and biomass sources. Its portfolio consists of approximately 21,000 megawatts of installed capacity. Brookfield Renewable Partners Limited operates as the general partner of Brookfield Renewable Partners L.P. The company was formerly known as Brookfield Renewable Energy Partners L.P. and changed its name to Brookfield Renewable Partners L.P. in May 2016. Brookfield Renewable Partners L.P. was founded in 1999 and is headquartered in Hamilton, Bermuda.
INVESTMENT RATING
Reflecting future returns on capital that are forecasted to be above the cost of capital, BEP.UN is expected to continue to be a modest Value Builder.
Brookfield Renewable Partners has a current Value Trend Rating of D (Negative).
This rating combines contradictory signals from two proprietary PTR measures of a stock’s attractiveness. Brookfield Renewable Partners has a slightly positive Appreciation Score of 63 but a poor Power Rating of 20, and the Negative Value Trend Rating results.
Brookfield Renewable Partners’ stock is selling well below targeted value. The current stock price of $32.21 compares to targeted value 12 months forward of $51.
This moderately high appreciation potential results in an appreciation score of 63 (only 37% of the universe has greater appreciation potential.)
Brookfield Renewable Partners has a Power Rating of 20. (BEP.UN’s poor Power Rating indicates that it only has a higher likelihood of achieving favorable investment performance over the near to intermediate term than 20% of companies in the universe.)
Factors contributing to this poor Power Rating include: the trend in BEP.UN’s earnings estimates has been unfavorable in recent months; the Electric Services comparison group is in a slightly weakened position currently; and recent price action has been slightly unfavorable.
INVESTMENT PROFILE
BEP.UN’s financial strength is low. Financial strength rating is 16.
Relative to the S&P 500 Composite, Brookfield Renewable Partners LP has slightly more Value than Growth characteristics; its appeal is likely to be to investors heavily oriented toward Income; the perception is that BEP.UN is normal risk. Low stock price volatility is a positive for BEP.UN. Relative weaknesses include: low historical profitability, low financial strength, and low historical growth. BEP.UN’s valuation is low: high dividend yield, high P/E ratio, and low price/book ratio. BEP.UN has unusually low market capitalization.
CURRENT SIGNALS
Brookfield Renewable Partners’ current operations are eroding. Return on equity is falling, reflecting: falling asset utilization; and falling tax keep rate.
Brookfield Renewable Partners’ current technical position is very weak. The stock price is in a 4.2 month down move. The stock has declined 16.6% from its prior high. The stock price is below its 200 day moving average which is in a downtrend.
ALERTS
Extremely significant positive changes in Brookfield Renewable Partner’s investment behavior have recently occurred: positive upside/downside volume, and price rise on very heavy volume.
The stock is currently rated D.
Brookfield Renewable Partners LP (TSE: BEP.UN) stock declined slightly by -1.0% on 4/30/24. The stock closed at $28.90. Trading volume in this decline was normal. The stock has been weak relative to the market over the last nine months but is unchanged during the last week.
CASH FLOW
In 2023, Brookfield Renewable Partners LP generated a very significant increase in cash of +$314 million (+28%). Sources of cash were much larger than uses. Cash generated from 2023 EBITDA totaled +$2,900 million. Non-operating sources contributed +$492 million (+17% of EBITDA). Cash taxes contributed +$715 million (+25% of EBITDA). Re-investment in the business amounted to -$7,144 million (-246% of EBITDA). On a net basis, debt investors furnished +$3,434 million (+118% of EBITDA) while equity investors received -$83 million (-3% of EBITDA).
BEP.UN’s Non-operating Income, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Brookfield Renewable Partners Lp Peer Group. In most years, Brookfield Renewable Partners LP was in the third quartile and top quartile. Currently, Brookfield Renewable Partners LP is at the upper quartile at +17% of EBITDA (+$492 million).
BEP.UN’s Cash Taxes, %EBITDA experienced a volatile overall downtrend over the period. This downtrend was accompanied by stability for the Brookfield Renewable Partners Lp Peer Group. In most years, Brookfield Renewable Partners LP was in the top quartile. Currently, Brookfield Renewable Partners LP is upper quartile at +25% of EBITDA (+$715 million).
BEP.UN’s Business Re-investment, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Brookfield Renewable Partners Lp Peer Group. In most years, Brookfield Renewable Partners LP was in the third quartile and lower quartile. Currently, Brookfield Renewable Partners LP is substantially below median at -246% of EBITDA (-$7,144 million).
BEP.UN’s Debt Investors, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Brookfield Renewable Partners Lp Peer Group. In most years, Brookfield Renewable Partners LP was in the top quartile and lower quartile. Currently, Brookfield Renewable Partners LP is at the upper quartile at +118% of EBITDA (+$3,434 million).
BEP.UN’s Equity Investors, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by stability for the Brookfield Renewable Partners Lp Peer Group. In most years, Brookfield Renewable Partners LP was in the second quartile and top quartile. Currently, Brookfield Renewable Partners LP is slightly above median at -3% of EBITDA (-$83 million).
BEP.UN’s Change in Cash, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by an uptrend for the Brookfield Renewable Partners Lp Peer Group. In most years, Brookfield Renewable Partners LP was in the second quartile and third quartile. Currently, Brookfield Renewable Partners LP is above median at +11% of EBITDA (+$314 million).
BEP.UN’s Cash, %Revenue has exhibited a volatile overall uptrend over the period. This improvement was accompanied by stability for the Brookfield Renewable Partners Lp Peer Group. (Since 2019 Cash, %Revenue has accelerated.) In most years, Brookfield Renewable Partners LP was in the top quartile. Currently, Brookfield Renewable Partners LP is at the upper quartile at +29%.
PROFITABILITY
BEP.UN’s return on equity has eroded very significantly since 2014.
The key to the story for BEP.UN is a very strong negative trend in pretax operating return significantly augmented by a very strong negative trend in non-operating factors.
The productivity of BEP.UN’s assets declined over the full period 2014-2023: asset turnover has suffered a strong overall downtrend.
Reinforcing this trend, pretax margin has experienced a downtrend but it experienced a very sharp recovery after the 2020 low.
Non-operating factors (income taxes and financial leverage) had a significant negative influence on return on equity.
BEP.UN’s return on equity is unavailable for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is at the lower quartile (0.7%) reflecting asset turnover that is lower quartile (0.07X) and slightly above median pretax margin (11.3%).
Tax “keep” rate (income tax management) is lower quartile (-8.8%) resulting in after tax return on assets that is unavailable.
Financial leverage (leverage) is unavailable .
GROWTH RATES
There are no significant differences between Brookfield Renewable Partner’s longer term growth and growth in recent years.
Brookfield Renewable Partner’s historical income statement and balance sheet growth are not available.
Annual revenue growth has been 6.7% per year.
Total asset growth has been 9.8% per year.
Annual E.P.S. growth has been 0.4% per year.
Equity growth has been 0.0% per year.
Brookfield Renewable Partner’s consensus growth rate forecast (average of Wall Street analysts) is 11.0% — substantially above the average of the historical growth measures.
Relative to the Brookfield Renewable Partners Lp Peer Group, Brookfield Renewable Partners LP historical growth measures are generally second quartile. Total asset growth (9.8%) has been at the upper quartile. Revenue growth (6.7%) has been above median. E.P.S. growth (0.4%) has been slightly above median. Equity growth (0.0%) has been at median.
Consistent with this pattern, consensus growth forecast (11.0%) is also at the upper quartile.
PRICE HISTORY
Over the full time period, Brookfield Renewable Partners LP! stock price performance has been variable and below market. Between July, 2013 and May, 2024, Brookfield Renewable Partners LP! stock price rose +72%; relative to the market, this was a -42% loss. Significant price move during the period: 1) December, 2018 – January, 2021: +146%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -27.1% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through April, 2024 of -27.1% is substantially below median relative to Brookfield Renewable Partners LP Peer Group.
Current 5-year total return performance of 10.1% is slightly above median relative to the S&P 500 Composite.
Through April, 2024, with slightly above median current 5-year total return of 10.1% relative to S&P 500 Composite, Brookfield Renewable Partners LP total return performance is above median relative to Brookfield Renewable Partners LP Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, BEP.UN’s overall valuation is normal. Ratio of enterprise value/revenue is upper quartile. Ratio of enterprise value/earnings before interest and taxes is slightly below median. Ratio of enterprise value/assets is lower quartile. Price/earnings ratio is unavailable. Price/equity ratio is unavailable.
Relative to Brookfield Renewable Partners LP Peer Group, BEP.UN’s overall valuation is normal. Ratio of enterprise value/earnings before interest and taxes is slightly above median. Ratio of enterprise value/revenue is near the upper quartile. Ratio of enterprise value/assets is lower quartile. Price/earnings ratio is unavailable. Price/equity ratio is unavailable.
Brookfield Renewable Partners LP has a major value gap compared to the median. For BEP.UN to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 7.88X to 7.08X. If BEP.UN’s ratio of enterprise value/revenue were to fall to 7.08X, its stock price would be lower by $-14 to $18.
For BEP.UN to achieve upper quartile valuation relative to the Brookfield Renewable Partners LP Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 7.88X to 8.06X. If BEP.UN’s ratio of enterprise value/revenue were to rise to 8.06X, its stock price would increase by $3 from the current level of $32.
VALUE TARGETS
Reflecting future returns on capital that are forecasted to be above the cost of capital, BEP.UN is expected to continue to be a modest Value Builder.
Brookfield Renewable Partners LP current Price Target of $51 represents a +59% change from the current price of $32.21.
This moderately high appreciation potential results in an appreciation score of 63 (only 37% of the universe has greater appreciation potential.)
Notwithstanding this moderately high Appreciation Score of 63, the low Power Rating of 20 results in an Value Trend Rating of D.
Brookfield Renewable Partners LP current Price Target is $51 (-13% from the 2023 Target of $59 but +59% from the 05/01/24 price of $32.21). This slight fall in the Target is the result of a -3% decrease in the equity base and a -11% decrease in the price/equity multiple. One Driver has a positive impact on the price/equity multiple, one has a negative impact, and one has no effect. The forecasted decline in cost of equity has a very large positive impact on the price/equity multiple. The forecasted flat return on equity has no impact. The forecasted decline in growth has a very large negative impact.
PTR’s return on equity forecast is 4.0% — in line with our recent forecasts. Forecasted return on equity erratic but little changed between 2015 and 2023. The current forecast is steady at the 2015 low of 4%.
PTR’s growth forecast is 0.0% — below our recent forecasts. Forecasted growth enjoyed a dramatic, erratic increase between 2015 and 2023. The current forecast is below the 2021 low of 4%.
PTR’s cost of equity forecast is 1.3% — in line with recent levels. Forecasted cost of equity enjoyed a dramatic, variable decline between 2015 and 2023. The current forecast is below the 2015 peak of 6.1%.
At Brookfield Renewable Partners LP! current price of $32.21, investors are placing a negative value of $-5 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of 7.0% per year, and a return on equity of 4.0% versus a cost of equity of 1.9%.
PTR’s 2025 Price Target of $51 is based on these forecasts and reflects an estimated value of existing assets of $23 and a value of future investments of $28.
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