With a notable daily gain of 17.9% and a 3-month gain of 30.91%, ABM Industries Inc (ABM, Financial) has caught the attention of many investors. Adding to its appeal is an Earnings Per Share (EPS) of $3.56. But the critical question remains: is ABM Industries fairly valued at its current market price? This article delves into a comprehensive valuation analysis to provide investors with a clearer picture of ABM Industries' market standing. Read on to understand the factors that contribute to its valuation and whether it's the right time to invest in ABM Industries.
Company Introduction
ABM Industries Inc (ABM, Financial) is a leading provider of integrated facility solutions, primarily operating within the United States. The company's business is spread across five segments: business and industry, aviation, technology and manufacturing, education, and technical solutions. With a significant portion of its revenue stemming from the business and industry segment, ABM Industries offers services ranging from janitorial and facilities engineering to parking management for various venues, as well as vehicle maintenance for rental car providers. The comparison between ABM Industries' stock price of $52.3 and the GF Value, an estimation of its fair value at $53.11, sets the stage for an in-depth analysis of the company's intrinsic value.
Summarize GF Value
The GF Value is a proprietary measure that reflects the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. According to this valuation method, ABM Industries (ABM, Financial) appears to be fairly valued. The GF Value suggests that if a stock's price is significantly above the GF Value Line, it may be overvalued, and conversely, if it is below, it may be undervalued. With a market cap of $3.40 billion and a current price of $52.3 per share, ABM Industries' stock demonstrates signs of being justly priced, indicating that the long-term return on its stock is likely to align with the company's business growth rate.
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Financial Strength
When considering an investment, the financial strength of a company is paramount. ABM Industries' cash-to-debt ratio stands at 0.07, which is lower than 88% of the companies in the Business Services industry. With an overall financial strength rating of 6 out of 10, ABM Industries displays a fair level of financial stability. The company's historical debt and cash flow are depicted in the chart below.
Profitability and Growth
A hallmark of low-risk investing is choosing companies with a consistent track record of profitability. ABM Industries has maintained profitability for 10 out of the past 10 years. In the previous 12 months, ABM Industries achieved revenues of $8 billion with an Earnings Per Share (EPS) of $3.56. However, its operating margin of 4.77% is considered lower than 54.84% of its peers in the Business Services industry. The company's profitability is ranked as fair by GuruFocus standards.
Growth is also a critical factor in a company's valuation. ABM Industries has displayed an average annual revenue growth of 6%, ranking better than 53.28% of companies in the Business Services industry. The 3-year average EBITDA growth rate is 13%, which is higher than 55.8% of the companies in the same industry.
ROIC vs WACC
Evaluating a company's profitability can also be done by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). ABM Industries' ROIC over the past 12 months is 7.21%, slightly above its WACC of 6.92%, indicating the company is creating value for its shareholders. The historical comparison of ABM Industries' ROIC and WACC is illustrated in the chart below.
Conclusion
In summary, ABM Industries (ABM, Financial) displays every indication of being fairly valued. The company's financial condition and profitability are rated as fair, and its growth prospects appear promising, outperforming more than half of its competitors in the Business Services industry. For a more detailed look into ABM Industries' financials, interested investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
