Brookfield Corporation (BN 0.58%) has an amazing record of growing shareholder value. Over the last 30 years, the leading global investment company has delivered a total annualized return of more than 15% for its investors. That's a higher return than the S&P 500 and some of the greatest companies in the world.
The company believes it's in a great position to continue growing shareholder value over the next five years. Despite that, it currently trades well below its intrinsic value. That's a good reason to buy the stock right now.
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A great company at a great price
At its annual Investor Day last fall, Brookfield's management team estimated that the company's net asset value was $133 billion, or about $84 per share. That valued the company at about 23 times its distributable earnings, a reasonable valuation multiple for an investment company.
Brookfield Corporation currently trades at less than $70 per share, significantly below its estimated value, which has only increased since last fall. That's a compelling level for a company with Brookfield's growth prospects.
The company currently believes it can grow its cash flow per share by more than 20% annually over the next five years. Growth drivers include the expansion of its wealth solutions business, the continued growth of its leading global alternative investment management platform, carried interest (its share of the excess profits achieved by its investment funds), and its capital allocation strategy.
These drivers position Brookfield to produce $47 billion, or $30 per share, of cumulative free cash flow over the next five years. It can use that money to pay dividends, repurchase shares, invest in its funds, and make acquisitions, all of which should enhance shareholder value. Brookfield believes these drivers will increase the company's value to $176 per share by 2029.
Brookfield Corporation's attractive valuation enhances its long-term total return potential. The low starting point puts the company in an even better position to deliver total returns in excess of 15% annually in the coming years.
