8/1//2018
EMCOR Group Inc NYSE: EME
After a top 200 Fortune 500 company, why not look at the bottom comparable? This time it's electrical and mechanical construction.
Price at write-up $76.22
Indexes (30, 180 day looks)
VIX: 13.15 (-3.05%, -0.52%)
TED: 35.49
S&P500: 2813 (2727, 2822)
Valuation Ratios
MarketCap 4.4B
Target: $78
My Thoughts
There's probably a volatility play here. Especially if construction is going to rebound even further over the next year, as this is a more pure construction exposure than FLR, however, I'm not sure that's going to happen. Between financing and the growth of the economy, I do expect to see an increase in starts over the next 6 months, but I don't see it continuing beyond 18 months. So any capital allocated to EME stands to gain dividends over that time period and something like a 3% capital gain on the stock itself.
Conclusion
I don't do a lot of write-ups when I don't see enough value in the market. There's no reason to get excited when there's nothing exciting happening. Sure, it might drop from $76 to $75 or $74 before it possibly dances with $80 but it probably won't, and best case if it did that's only a 5% difference. So you assume a lot of downside risk if the economy peters out sooner than expected with very little upside if the economy does a bit better than expected. This stock wouldn't even have been worth buying after the crashes in 2000 or 2008 because there were better opportunities.
Not a bad company though, I certainly wouldn't short it. But there's nothing for me here.
Due Diligence - BBU, FLR, JEC, KBR
EMCOR Group Inc NYSE: EME
After a top 200 Fortune 500 company, why not look at the bottom comparable? This time it's electrical and mechanical construction.
Price at write-up $76.22
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) | 22.09 |
| Price/Sales (TTM) | 0.57x |
| Earnings per share | 3.48 |
| Price/Book (MRQ) | 2.58x |
| Price/Cash Flow (TTM) | 15.26x |
| Held by institutions | 94.34% |
| Short interest | 0.73% |
| Dividend | 0.42% |
MarketCap 4.4B
Target: $78
Plenty of share issuance, but insiders are holding onto their options. The same issuance of stock with stock buy-backs as FLR doesn't make me happy. But earnings per share growth does. It's refreshing that the PE isn't crazy and the cash flow sheets look decent.
My Thoughts
There's probably a volatility play here. Especially if construction is going to rebound even further over the next year, as this is a more pure construction exposure than FLR, however, I'm not sure that's going to happen. Between financing and the growth of the economy, I do expect to see an increase in starts over the next 6 months, but I don't see it continuing beyond 18 months. So any capital allocated to EME stands to gain dividends over that time period and something like a 3% capital gain on the stock itself.
Conclusion
I don't do a lot of write-ups when I don't see enough value in the market. There's no reason to get excited when there's nothing exciting happening. Sure, it might drop from $76 to $75 or $74 before it possibly dances with $80 but it probably won't, and best case if it did that's only a 5% difference. So you assume a lot of downside risk if the economy peters out sooner than expected with very little upside if the economy does a bit better than expected. This stock wouldn't even have been worth buying after the crashes in 2000 or 2008 because there were better opportunities.
Not a bad company though, I certainly wouldn't short it. But there's nothing for me here.
Due Diligence - BBU, FLR, JEC, KBR