Is Brookfield Asset Management (TSX:BAM) Cheap After Its Latest Property Joint Venture?

Brookfield Asset Management (TSX:BAM) is back in focus after affiliates agreed to a US$693.9 million joint venture with Varia US Properties AG, covering 13 U.S. multifamily properties across nine states.

See our latest analysis for Brookfield Asset Management.

The joint venture news lands after an active few weeks for Brookfield Asset Management, which reported higher second quarter revenue and net income, affirmed its quarterly dividend of US$0.5025 per share, and completed a further US$200 million in share buybacks. At a share price of CA$75.35, the stock has a 30 day share price return of 11.28% and a 3 year total shareholder return of 84.05%, although the 1 year total shareholder return is down 7.91%. This suggests longer term holders have still done well even as shorter term momentum has been mixed.

If you want to see how other asset focused or alternative managers are shaping up after recent deals and capital moves, it is worth scanning our 3 top founder-led companies

Brookfield Asset Management has just put fresh capital to work and the share price has moved higher over the past month. The next step is to weigh paying up today against waiting for a potentially cheaper entry as the numbers stack up.

Most Popular Narrative: 6.1% Undervalued

On the latest numbers, Brookfield Asset Management's narrative fair value of CA$80.24 sits modestly above the CA$75.35 close, which frames the current pricing debate.

Growing allocations from institutional, insurance and individual investors into private markets are supporting the expansion of fee-bearing capital, which is already at US$603b and directly tied to future fee-related revenue and distributable earnings.

Read the complete narrative.

Want to see what sits behind that fee machine? The narrative leans on faster revenue gains, rising margins and a richer earnings multiple than the wider market. Curious which assumptions really move that CA$80.24 figure?

Result: Fair Value of CA$80.24 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the Brookfield Asset Management narrative depends on continued private market inflows and the timely deployment of its US$130b in uncalled commitments into fee earning strategies.

Find out about the key risks to this Brookfield Asset Management narrative.

Another View on Brookfield Asset Management's Valuation

The story looks different once the focus shifts from analyst targets to current P/E levels. Brookfield Asset Management trades on a P/E of 30.9x, while the Canadian Capital Markets industry sits at 7.1x and close peers average 30.4x. The fair ratio sits higher at 33.5x.

This mix of a premium to the industry, only a slight premium to peers, and a gap to the fair ratio highlights both upside potential and valuation risk. The key question is whether Brookfield Asset Management's future earnings justify staying at the higher end of that range or moving closer to the fair ratio.

See what the numbers say about this price — find out in our valuation breakdown.

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Next Steps

With mixed signals on Brookfield Asset Management's valuation and outlook, now is the time to look through the detail and test the narrative for yourself. To see both the key upside drivers and the main concerns in one place, start with the 2 key rewards and 1 important warning sign

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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.