Wondering whether or not it’s too late to buy Brookfield Renewable Partners (TSX:BEP.UN) is a big question. While the renewable asset manager has seen growth in its overall earnings over the last few years, the company has struggled to see its share price grow with it.
After hitting all-time highs back in 2021, the company shrunk lower and lower. Now, its share price has rarely hit over $40. So, has its time passed? Let’s take a look at whether it’s now too little, too late for Brookfield Renewable stock.
Why the fall?
To understand whether or not Brookfield Renewable stock is a good buy now, we have to look at what happened before. The company saw its shares fall further and further as it looked as though interest rates would rise higher and higher.
There are numerous ways that interest rates affect the company. If interest rates rise, the cost of debt increases, potentially making it more expensive for the company to finance new projects or refinance existing debt. Conversely, falling interest rates may reduce borrowing costs, making it cheaper for the company to raise capital.
This explains why the company was acquiring so much during a low interest rate environment. However, shareholders weren’t as impressed with the company’s decision to continue acquiring with higher interest rates.
In this case, higher interest rates typically result in higher discount rates, which can lower the present value of future cash flows, potentially leading to a decrease in the company’s valuation. Conversely, lower interest rates may increase the present value of future cash flows, positively impacting the company’s valuation.
Remaining competitive
However, as we’ve seen, Brookfield Renewable stock remained competitive. The company has a large demand for its products and continues to be able to acquire more business while other renewable companies cannot.
Now, there’s been positive news. During the first quarter of 2024, the company generated funds from operations (FFO) of US$296 million. This was an 8% increase compared to the same time last year. Add to this that the company was able to benefit from long-dated and fixed-rate debt financing. Now, the company is also on a better footing in a financial sense.
So, while the stock’s top line is growing, its bottom line is improving as well. And that’s only getting better as it continues to make deals. Most recently, this was with Microsoft as a strategic partner. Here, Brookfield Renewable stock will supply renewable energy of 10,500 megawatts to the company’s data centres between 2026 and 2030.
Bottom line
Overall, Brookfield Renewable stock looks like the perfect opportunity for value seekers. Shares continue to be undervalued, trading at 1.68 times earnings as of writing. Plus, shares are still down by 15% in the last year at the time of writing this article.
Meanwhile, the stock has been improving its bottom line while also expanding its top-line growth. It now has secured opportunities for renewable energy capacity over the next few years. Overall, and with a 5.37% dividend yield on hand, Brookfield Renewable stock looks like a prime time to buy.
