If you hold Transurban Group (ASX: TCL) shares, ask yourself: "Am I 100% confident with my holding?"
If your not, you probably shouldn't own them.
Don't get me wrong, Transurban is a great business but boy are its financials complicated.
Indeed, I've racked my brain for far too long trying to accurately value the company's shares, but given the assumptions I've have used to derive a fair value (or intrinsic value) for its shares, I have significantly eroded the reliability of my analysis.
That's where the hope and pray aspect — otherwise known as speculation — of investment comes in.
Based on my forecasts, EBITDA (earnings before interest tax, tax, depreciation and amortization) will jump strongly over the next few years as the company beds down the enormous Queensland Motorways Portfolio investment. In addition, although net debt will balloon out, EBIT (earnings before interest and tax) will return to a healthy upwards trajectory in FY16 if everything goes smoothly.
In summary, I believe Transurban is well managed. However, I couldn't be a part-owner of the business because the way it's structured utterly perplexes this Fool. Therefore I'm giving it a wide berth. At least until its new portfolio of roads is integrated into the business.
What about NAB and Brambles?
Another two ASX stocks I think are fully priced are National Australia Bank Ltd (ASX: NAB) and Brambles Limited (ASX: BXB).
NAB recently undertook the ASX's biggest ever rights issue to fund the divestment of its troubled UK bank, Clydesdale. Whilst this is undoubtedly a positive move for the bank over the long term, NAB's shares were already expensive before the announcement of its half-year results and subsequent rights issue. For now, I'm leaving NAB shares on my watchlist until we're afforded a more compelling entry price. I suggest readers do the same.
Finally, Brambles – a leading international logistics company specialising in the pooling of unit-load equipment – also appears fairly valued at today's prices. A steady and reliable dividend-paying stock, Brambles is continuing its growth into emerging markets such as South America and Asia. Although, with its shares currently trading at 26.6x last year's profits per share, investors should wait for a lower entry point before committing to a purchase.
Here's a better stock idea than NAB and Brambles…
I'm a firm believer long-term sharemarket investors shouldn't hold anything they don't understand.
When share prices inevitably crash (and they will!), knowing the ins-and-outs of the business helps you to sleep easy at night. For that reason Transurban is off my watchlist.
