8/1//2018
Fluor Corp NYSE: FLR
Flour Corp is a holding company with subsidiaries in several sectors: Oil & Gas, Industrial & Infrastructure, and Government & Power. It's had a bit of a rocky past since it's founding in the early 1900s and sold out of its gold, zinc, and coal mining operations as it transitioned from a family run company into more of a corporate entity and integrated solutions provider for the previously noted 3 divisions. Approximately 30% of its revenue was based in the US as of 2011 which might be nice for its diversification. It took a big hit ($60 to $44.49) around May 4 2018 so I was wondering if it might've been undervalued and might still be. It's 153 on the Fortune 500 list, if that means anything to you.
Price at write-up $51
Indexes (30, 180 day looks)
VIX: 13.15 (-3.05%, -0.52%)
TED: 35.49
S&P500: 2813 (2727, 2822)
Valuation Ratios
MarketCap 7.2B
Target: $53
Less issuance of common shares than in most stocks I've looked at recently, certainly a positive. Debt seems to be reasonably well managed and consistent with cash-outflow being reasonably balanced by inflow. Stock buybacks in 2013, 2014, and 2015 basically at a time of a five year high is not something I like to see, but is consistent with what a lot of companies were doing at that time for the same boneheaded reasons.
My Thoughts
This stock is well followed by the market and out of my wheelhouse, so I have no special insight. Cashflow looks ok, but there are some dubious actions by management from a shareholder perspective (ordinary BS of issuing options to insiders and buying back shares), though certainly status quo for this sort of well-known company and industry. The earnings growth rate is almost non-existent while earnings themselves continue to increase consistently, if linearly - and earnings growth is a big factor for me. PE is a little high for my tastes meaning the market has priced in a lot.
Conclusion
I'm sure FLR isn't an unreasonable holding, and it does seem to be undervalued. However, it's not undervalued enough for me. If the stock price had tanked to sub $40 with the fundamentals I'm reading today and I could've bought near that price, I'd probably be interested as the upside potential would mitigate the risk. But with my concern for the broader market there just isn't enough value here for me to do anything about. If Oil and Gas had a big future I might hop on during the next correction. But at the end of the day this is a company based on a commodity that probably doesn't have a bright future so there's little point in holding it for 10 years. It's dividend isn't impressive or of particular value either, so everything about isn't the least bit sexy. This is the community sidewalk of companies. If I had heard about FLR in May instead of July I probably would've picked up some shares for a nice dip-and-flip if my global pessimism could've been sufficiently allayed by an attractive price as it'll probably hit 55 by early next year for a nice 25% return, but the 8% potential upside isn't worth it for me today.
Due Diligence - BBU, EME, JEC
Fluor Corp NYSE: FLR
Flour Corp is a holding company with subsidiaries in several sectors: Oil & Gas, Industrial & Infrastructure, and Government & Power. It's had a bit of a rocky past since it's founding in the early 1900s and sold out of its gold, zinc, and coal mining operations as it transitioned from a family run company into more of a corporate entity and integrated solutions provider for the previously noted 3 divisions. Approximately 30% of its revenue was based in the US as of 2011 which might be nice for its diversification. It took a big hit ($60 to $44.49) around May 4 2018 so I was wondering if it might've been undervalued and might still be. It's 153 on the Fortune 500 list, if that means anything to you.
Price at write-up $51
Indexes (30, 180 day looks)
VIX: 13.15 (-3.05%, -0.52%)
TED: 35.49
S&P500: 2813 (2727, 2822)
Valuation Ratios
| Price/Earnings (TTM) | 38.25 |
| Price/Sales (TTM) | 0.37x |
| Earnings per share | 1.34 |
| Price/Book (MRQ) | 2.4x |
| Price/Cash Flow (TTM) | 14.94x |
| Held by institutions | 87.83% |
| Short interest | 3.4% |
| Dividend | 1.64% |
MarketCap 7.2B
Target: $53
Less issuance of common shares than in most stocks I've looked at recently, certainly a positive. Debt seems to be reasonably well managed and consistent with cash-outflow being reasonably balanced by inflow. Stock buybacks in 2013, 2014, and 2015 basically at a time of a five year high is not something I like to see, but is consistent with what a lot of companies were doing at that time for the same boneheaded reasons.
My Thoughts
This stock is well followed by the market and out of my wheelhouse, so I have no special insight. Cashflow looks ok, but there are some dubious actions by management from a shareholder perspective (ordinary BS of issuing options to insiders and buying back shares), though certainly status quo for this sort of well-known company and industry. The earnings growth rate is almost non-existent while earnings themselves continue to increase consistently, if linearly - and earnings growth is a big factor for me. PE is a little high for my tastes meaning the market has priced in a lot.
Conclusion
I'm sure FLR isn't an unreasonable holding, and it does seem to be undervalued. However, it's not undervalued enough for me. If the stock price had tanked to sub $40 with the fundamentals I'm reading today and I could've bought near that price, I'd probably be interested as the upside potential would mitigate the risk. But with my concern for the broader market there just isn't enough value here for me to do anything about. If Oil and Gas had a big future I might hop on during the next correction. But at the end of the day this is a company based on a commodity that probably doesn't have a bright future so there's little point in holding it for 10 years. It's dividend isn't impressive or of particular value either, so everything about isn't the least bit sexy. This is the community sidewalk of companies. If I had heard about FLR in May instead of July I probably would've picked up some shares for a nice dip-and-flip if my global pessimism could've been sufficiently allayed by an attractive price as it'll probably hit 55 by early next year for a nice 25% return, but the 8% potential upside isn't worth it for me today.
Due Diligence - BBU, EME, JEC