ABM Industries Inc (ABM, Financial) has recently experienced a daily loss of 14.46% and a 3-month loss of 18.58%. Despite these losses, its Earnings Per Share (EPS) stands at 2.94. The question that arises is - is this stock modestly undervalued? This article aims to provide an in-depth valuation analysis of ABM Industries. Read on to gain valuable insights into the intrinsic value of the company.
Introduction to ABM Industries
ABM Industries Inc (ABM, Financial) is a provider of integrated facility solutions. It offers its solutions through five segments: business and industry, aviation, technology and manufacturing, education, and technical solutions. The company derives the majority of its revenue from the business and industry segment. With a market capitalization of $2.50 billion and sales of $7.90 billion, it's a significant player in the Business Services industry, primarily operating in the United States.
The stock is currently priced at $38.33, which is below its estimated fair value (GF Value) of $52.66. Is this an opportunity for investors to buy an undervalued stock? Let's delve deeper into the valuation of ABM Industries.
Understanding the GF Value
The GF Value is a proprietary measure that estimates a stock's intrinsic value based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Currently, ABM Industries stock appears to be modestly undervalued, with the potential for higher future returns due to the stock being relatively undervalued.
Financial Strength of ABM Industries
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. ABM Industries has a cash-to-debt ratio of 0.05, ranking worse than 90.6% of companies in the Business Services industry. The overall financial strength of ABM Industries is 5 out of 10, indicating fair financial strength.
Profitability and Growth of ABM Industries
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. ABM Industries has been profitable 10 over the past 10 years and has an operating margin of 4.17%. The company's profitability ranks at 7 out of 10, indicating fair profitability.
Furthermore, growth is an essential factor in the valuation of a company. ABM Industries's 3-year average revenue growth rate is better than 55.26% of companies in the Business Services industry. The company's 3-year average EBITDA growth rate is 13%, ranking better than 56.01% of companies in the industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate its profitability. Over the past 12 months, ABM Industries's ROIC was 6.06, while its WACC came in at 6.73.
Conclusion
Overall, ABM Industries appears to be modestly undervalued, with fair financial condition and profitability. Its growth ranks better than 56.01% of companies in the Business Services industry. For more details about ABM Industries stock, you can check out its 30-Year Financials here.
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