Brookfield Corporation (BN -1.52%) has quietly posted exceptional returns over the past few decades. The global investment firm has absolutely pulverized the S&P 500 (^GSPC 0.61%) over the last 30 years, delivering an 18% annualized return compared to 11% for the broader market index. The company’s robust returns have outperformed many top-performing companies, including Berkshire Hathaway (13% annualized), Walmart (12%), and Amazon (18% annualized over the past 25 years, compared to 19% for Brookfield).
The investment manager believes its best days lie ahead. Brookfield estimates that it can grow the value of the firm to $176 per share by 2029. With shares currently trading at less than $60 apiece, it could enable investors to nearly triple the value of their investment. Here’s how it plans to get there.
Multiple growth catalysts
Brookfield Corporation’s target is to deliver 15%-plus annualized returns for its shareholders. That’s no easy task, considering the S&P 500 has historically delivered around a 10% average annual return.
However, the company believes it’s in a better position now to achieve its long-term returns target than ever before. That’s due to the growth it sees ahead for its businesses, which are capitalizing on several major growth megatrends. On top of that, several tailwinds are turning in its favor, which should drive additional earnings growth.
For example, the company’s infrastructure operating business, led by Brookfield Infrastructure, is capitalizing on the massive need for global infrastructure investment. Brookfield believes the world needs about $100 trillion to maintain, upgrade, and build infrastructure over the next 15 years, including an estimated market opportunity of over $8 trillion for artificial intelligence (AI)-related infrastructure over the next three to five years. Brookfield Infrastructure currently has a record $8 billion organic capital project backlog, with another $4 billion of projects under development.
That’s one growth driver for one of its operating businesses. Another notable opportunity is within its renewable energy operating unit, Brookfield Renewable. That company is capitalizing on surging demand for renewable energy, partly powered by AI data centers.
Brookfield Corporation also sees tremendous growth in its wealth solutions business and alternative asset management platform. In addition, it expects to deploy the massive and growing free cash flow generated by its businesses into new sources of earnings.
Growing value
Brookfield Corporation believes it has set its business up to grow its earnings per share by more than 20% annually over the next five years. That’s an acceleration from the 18% annualized earnings growth rate it has delivered over the past five years. That positions it to produce a cumulative $47 billion, or $30 per share, of free cash flow, roughly 75% of which it intends to retain to help support its ability to compound capital for investors. It plans to return the remainder to shareholders through a growing dividend and opportunistic share repurchases.
The company believes that delivering this earnings growth will increase the intrinsic value of the firm to $176 per share by 2029, even while assuming a lower valuation multiple (15 times distributable earnings). That implies a 16% average annual return from its current estimated value of $84 per share (assuming 23x distributable earnings, which is in line with other investment firms). That valuation is well above the current stock price of less than $60 per share.
If the company can achieve its 2029 plan value, it can deliver even higher total returns from today’s share price. For example, an investor who buys about $1,000 worth of Brookfield Corporation stock at the current share price could see that investment grow to over $2,900 by 2029 if it hits its growth and valuation target of $176 per share.
This wealth-creating machine isn’t done yet
Brookfield Corporation has been a very high-return investment over the years. It expects to continue creating a lot of value for its investors over the next five years as it executes its strategic plan. That upside potential makes it an excellent stock to buy and hold right now.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Matt DiLallo has positions in Amazon, Berkshire Hathaway, Brookfield Corporation, Brookfield Infrastructure, Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Brookfield, Brookfield Corporation, and Walmart. The Motley Fool recommends Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.
