BBU

We rate Brookfield Business Partners L.P. (BBU) as a Buy with a composite score of 66.1/100 at a current price of $34.25. The stock scores above average across the majority of our six quantitative factors and ranks #232 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (94th percentile) and investment (77th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a No Moat rating (23/100), High uncertainty, and Poor capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Brookfield Business Partners L.P. holds a top-quartile position (#7 of 50) within the Construction sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 66.1/100 places it at rank #232 in our full 7,333-stock universe. At $1.7B in market capitalization, Brookfield Business Partners L.P. is a small-cap player in the Construction space, which limits certain scale advantages but may allow for more agile strategic execution.

Despite positive momentum (68th percentile), revenue contraction of -26% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 14% (-9.6pp vs sector) narrow to operating margins of 7% (-0.2pp vs sector) and net margins of 2.2%, yielding a gross-to-net conversion rate of 16%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $34.25, Brookfield Business Partners L.P. appears undervalued relative to its fundamentals. Our value factor score of 94/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at EV/EBITDA of 1.3x (discounted to peers), P/B of 0.9x, P/S of 0.0x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a High uncertainty rating to Brookfield Business Partners L.P.. Key risk factors include significant leverage (1081% debt-to-equity), the combination of leverage (1081% D/E) and thin margins (2.2% net) amplifies downside risk. The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (1081% debt-to-equity); the combination of leverage (1081% D/E) and thin margins (2.2% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 59th percentile and quality factor at the 63th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate Brookfield Business Partners L.P.'s capital allocation as Poor. Key concerns include elevated leverage (1081% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Brookfield Business Partners L.P. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Brookfield Business Partners L.P. receives a Buy rating with a composite score of 66.1/100 (rank #232 of 7,333). Our quantitative framework assigns a No Moat (23/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 72/100.

Our analysis supports a constructive view on Brookfield Business Partners L.P.. The combination of the current valuation, high uncertainty, and poor capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.