Intrinsic value of Comfort Systems USA - FIX

Previous Close

$34.90

  Intrinsic Value

premium content

  Rating & Target

premium content

  Value-price divergence*

premium content

Previous close

$34.90

 
Intrinsic value

$28.75

 
Up/down potential

-18%

 
Rating

hold

 
Value-price divergence* premium content

Premium access subscription - $499/yr

please register and log in before paying

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of FIX stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.35
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  1,634
  1,667
  1,705
  1,749
  1,798
  1,853
  1,912
  1,977
  2,048
  2,124
  2,205
  2,293
  2,386
  2,485
  2,590
  2,702
  2,820
  2,946
  3,078
  3,218
  3,366
  3,522
  3,687
  3,860
  4,043
  4,235
  4,438
  4,651
  4,875
  5,112
  5,360
Variable operating expenses, $m
 
  1,353
  1,384
  1,419
  1,459
  1,502
  1,550
  1,603
  1,659
  1,720
  1,786
  1,841
  1,915
  1,995
  2,080
  2,169
  2,264
  2,365
  2,471
  2,584
  2,702
  2,828
  2,960
  3,099
  3,246
  3,400
  3,563
  3,734
  3,914
  4,104
  4,303
Fixed operating expenses, $m
 
  217
  223
  228
  234
  240
  246
  252
  258
  265
  271
  278
  285
  292
  300
  307
  315
  323
  331
  339
  347
  356
  365
  374
  383
  393
  403
  413
  423
  434
  445
Total operating expenses, $m
  1,533
  1,570
  1,607
  1,647
  1,693
  1,742
  1,796
  1,855
  1,917
  1,985
  2,057
  2,119
  2,200
  2,287
  2,380
  2,476
  2,579
  2,688
  2,802
  2,923
  3,049
  3,184
  3,325
  3,473
  3,629
  3,793
  3,966
  4,147
  4,337
  4,538
  4,748
Operating income, $m
  102
  96
  98
  102
  106
  110
  116
  123
  130
  139
  148
  174
  185
  198
  211
  226
  241
  258
  276
  295
  316
  338
  362
  387
  413
  442
  472
  504
  538
  574
  612
EBITDA, $m
  128
  122
  125
  128
  132
  138
  144
  151
  159
  168
  178
  189
  201
  214
  228
  244
  260
  278
  297
  317
  339
  362
  386
  413
  441
  470
  502
  535
  570
  608
  648
Interest expense (income), $m
  2
  1
  2
  4
  7
  9
  12
  16
  19
  23
  27
  31
  36
  41
  47
  52
  58
  65
  71
  79
  86
  94
  103
  112
  121
  131
  141
  152
  164
  176
  189
Earnings before tax, $m
  101
  96
  96
  97
  99
  101
  104
  107
  111
  116
  121
  142
  149
  156
  164
  173
  183
  193
  205
  217
  230
  244
  259
  275
  293
  311
  331
  352
  374
  398
  423
Tax expense, $m
  36
  26
  26
  26
  27
  27
  28
  29
  30
  31
  33
  38
  40
  42
  44
  47
  49
  52
  55
  59
  62
  66
  70
  74
  79
  84
  89
  95
  101
  107
  114
Net income, $m
  65
  70
  70
  71
  72
  74
  76
  78
  81
  85
  89
  104
  109
  114
  120
  127
  134
  141
  149
  158
  168
  178
  189
  201
  214
  227
  241
  257
  273
  290
  309

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  32
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  709
  690
  706
  724
  745
  767
  792
  819
  848
  880
  914
  950
  988
  1,029
  1,073
  1,119
  1,168
  1,220
  1,275
  1,333
  1,394
  1,459
  1,527
  1,599
  1,675
  1,754
  1,838
  1,927
  2,020
  2,117
  2,220
Adjusted assets (=assets-cash), $m
  677
  690
  706
  724
  745
  767
  792
  819
  848
  880
  914
  950
  988
  1,029
  1,073
  1,119
  1,168
  1,220
  1,275
  1,333
  1,394
  1,459
  1,527
  1,599
  1,675
  1,754
  1,838
  1,927
  2,020
  2,117
  2,220
Revenue / Adjusted assets
  2.414
  2.416
  2.415
  2.416
  2.413
  2.416
  2.414
  2.414
  2.415
  2.414
  2.412
  2.414
  2.415
  2.415
  2.414
  2.415
  2.414
  2.415
  2.414
  2.414
  2.415
  2.414
  2.415
  2.414
  2.414
  2.414
  2.415
  2.414
  2.413
  2.415
  2.414
Average production assets, $m
  106
  108
  111
  114
  117
  120
  124
  129
  133
  138
  143
  149
  155
  162
  168
  176
  183
  191
  200
  209
  219
  229
  240
  251
  263
  275
  288
  302
  317
  332
  348
Working capital, $m
  98
  68
  70
  72
  74
  76
  78
  81
  84
  87
  90
  94
  98
  102
  106
  111
  116
  121
  126
  132
  138
  144
  151
  158
  166
  174
  182
  191
  200
  210
  220
Total debt, $m
  3
  9
  16
  25
  35
  46
  58
  72
  86
  101
  118
  135
  154
  174
  196
  218
  242
  268
  295
  323
  353
  384
  418
  453
  490
  529
  570
  613
  659
  706
  757
Total liabilities, $m
  332
  338
  345
  354
  364
  375
  387
  401
  415
  430
  447
  464
  483
  503
  525
  547
  571
  597
  624
  652
  682
  713
  747
  782
  819
  858
  899
  942
  988
  1,035
  1,086
Total equity, $m
  377
  353
  361
  370
  381
  392
  405
  419
  434
  450
  467
  485
  505
  526
  548
  572
  597
  624
  652
  681
  713
  746
  780
  817
  856
  897
  939
  985
  1,032
  1,082
  1,135
Total liabilities and equity, $m
  709
  691
  706
  724
  745
  767
  792
  820
  849
  880
  914
  949
  988
  1,029
  1,073
  1,119
  1,168
  1,221
  1,276
  1,333
  1,395
  1,459
  1,527
  1,599
  1,675
  1,755
  1,838
  1,927
  2,020
  2,117
  2,221
Debt-to-equity ratio
  0.008
  0.020
  0.050
  0.070
  0.090
  0.120
  0.140
  0.170
  0.200
  0.230
  0.250
  0.280
  0.310
  0.330
  0.360
  0.380
  0.410
  0.430
  0.450
  0.470
  0.500
  0.520
  0.540
  0.550
  0.570
  0.590
  0.610
  0.620
  0.640
  0.650
  0.670
Adjusted equity ratio
  0.510
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511
  0.511

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  65
  70
  70
  71
  72
  74
  76
  78
  81
  85
  89
  104
  109
  114
  120
  127
  134
  141
  149
  158
  168
  178
  189
  201
  214
  227
  241
  257
  273
  290
  309
Depreciation, amort., depletion, $m
  26
  26
  26
  27
  27
  27
  28
  28
  29
  29
  30
  15
  16
  17
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
Funds from operations, $m
  88
  96
  97
  98
  99
  101
  104
  106
  110
  114
  118
  119
  125
  131
  137
  145
  152
  161
  170
  180
  190
  202
  214
  227
  241
  255
  271
  288
  306
  325
  345
Change in working capital, $m
  -3
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  7
  7
  7
  8
  8
  9
  9
  10
  10
Cash from operations, $m
  91
  99
  95
  96
  97
  99
  101
  104
  107
  111
  115
  116
  121
  127
  133
  140
  148
  156
  165
  174
  184
  195
  207
  220
  233
  248
  263
  279
  297
  315
  335
Maintenance CAPEX, $m
  0
  -11
  -11
  -11
  -12
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -33
  -34
New CAPEX, $m
  -23
  -3
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
Cash from investing activities, $m
  -79
  -14
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -21
  -21
  -22
  -24
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -36
  -38
  -40
  -41
  -44
  -46
  -48
  -50
Free cash flow, $m
  12
  85
  81
  81
  82
  83
  85
  87
  89
  92
  95
  95
  100
  104
  110
  115
  122
  129
  136
  144
  153
  163
  173
  184
  195
  208
  221
  236
  251
  267
  284
Issuance/(repayment) of debt, $m
  -11
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
Issuance/(repurchase) of shares, $m
  -12
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -26
  7
  8
  9
  10
  11
  12
  13
  14
  15
  17
  18
  19
  20
  21
  23
  24
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  43
  45
  48
  50
Total cash flow (excl. dividends), $m
  -14
  92
  89
  90
  92
  94
  97
  100
  103
  107
  112
  113
  118
  124
  131
  138
  146
  154
  163
  173
  183
  194
  206
  219
  232
  247
  262
  279
  296
  315
  335
Retained Cash Flow (-), $m
  -30
  -7
  -8
  -9
  -10
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -24
  -25
  -27
  -28
  -30
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
Prev. year cash balance distribution, $m
 
  31
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  116
  81
  81
  82
  83
  84
  86
  89
  91
  95
  94
  99
  103
  109
  114
  121
  128
  135
  143
  152
  161
  171
  182
  194
  206
  219
  234
  249
  265
  282
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  111
  74
  71
  67
  64
  61
  58
  55
  53
  50
  45
  42
  39
  36
  34
  31
  28
  25
  22
  19
  17
  14
  12
  10
  8
  6
  5
  4
  3
  2
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Comfort Systems USA, Inc. provides mechanical installation, renovation, maintenance, repair, and replacement services for the mechanical services industry in the United States. It is involved in the design, engineering, integration, installation, and start-up of mechanical and related systems; and maintenance, repair, replacement, renovation, expansion, reconfiguration, and monitoring of mechanical systems, including heating, ventilation, and air conditioning (HVAC) systems, as well as industrial process piping. The company provides its services for office buildings, retail centers, apartment complexes, and manufacturing plants; healthcare, education, and government facilities; and other commercial, industrial, and institutional facilities. It serves building owners and developers, general contractors, architects, consulting engineers, and property managers in the commercial, industrial, and institutional HVAC markets. Comfort Systems USA, Inc. was founded in 1917 and is headquartered in Houston, Texas.

FINANCIAL RATIOS  of  Comfort Systems USA (FIX)

Valuation Ratios
P/E Ratio 20
Price to Sales 0.8
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 14.3
Price to Free Cash Flow 19.1
Growth Rates
Sales Growth Rate 3.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 9.5%
Cap. Spend. - 3 Yr. Gr. Rate 6.2%
Financial Strength
Quick Ratio 32
Current Ratio 0
LT Debt to Equity 0.5%
Total Debt to Equity 0.8%
Interest Coverage 52
Management Effectiveness
Return On Assets 9.5%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 17.6%
Ret/ On T. Cap. - 3 Yr. Avg. 12.9%
Return On Equity 18%
Return On Equity - 3 Yr. Avg. 13.5%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 21.1%
Gross Margin - 3 Yr. Avg. 19.6%
EBITDA Margin 7.9%
EBITDA Margin - 3 Yr. Avg. 6.5%
Operating Margin 6.2%
Oper. Margin - 3 Yr. Avg. 5%
Pre-Tax Margin 6.2%
Pre-Tax Margin - 3 Yr. Avg. 4.9%
Net Profit Margin 4%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate 35.6%
Eff/ Tax Rate - 3 Yr. Avg. 33%
Payout Ratio 15.4%

FIX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FIX stock intrinsic value calculation we used $1634 million for the last fiscal year's total revenue generated by Comfort Systems USA. The default revenue input number comes from 2016 income statement of Comfort Systems USA. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FIX stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for FIX is calculated based on our internal credit rating of Comfort Systems USA, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Comfort Systems USA.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FIX stock the variable cost ratio is equal to 81.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $212 million in the base year in the intrinsic value calculation for FIX stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 26.7% for Comfort Systems USA.

Corporate tax rate of 27% is the nominal tax rate for Comfort Systems USA. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FIX stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FIX are equal to 6.5%.

Life of production assets of 9.7 years is the average useful life of capital assets used in Comfort Systems USA operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FIX is equal to 4.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $377 million for Comfort Systems USA - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 37.249 million for Comfort Systems USA is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Comfort Systems USA at the current share price and the inputted number of shares is $1.3 billion.


Premium access subscription - $499/yr

please register and log in before paying
RELATED COMPANIES Price Int.Val. Rating
EME EMCOR Group 64.05 prem.  prem.
IESC IES Holdings 16.00 prem.  prem.
UTX United Technol 122.25 prem.  prem.
WPCS WPCS Internati 1.40 prem.  prem.
ABM ABM Industries 42.30 prem.  prem.

COMPANY NEWS

▶ Is There Life for Alibaba outside e-Commerce?   [May-02-17 09:10AM  Market Realist]
▶ Comfort Systems posts 1Q profit   [Apr-26-17 05:38PM  Associated Press]
▶ Texas HVAC firm closes $100M deal for Tampa mechanical contractor   [Apr-03-17 05:55PM  at bizjournals.com]
▶ Texas HVAC firm closes $100M deal for Tampa mechanical contractor   [05:55PM  American City Business Journals]
▶ Comfort Systems USA Announces Acquisition   [04:07PM  Business Wire]
▶ Comfort Systems USA Announces Acquisition   [04:23PM  Business Wire]
▶ How McEwen Mining Inc (MUX) Stacks Up Against Its Peers   [Dec-13-16 01:27AM  at Insider Monkey]
▶ Is Wix.Com Ltd (WIX) A Good Stock to Buy?   [Nov-28-16 10:15AM  at Insider Monkey]
▶ Keeping Cool With HVAC Dividend Stocks   [Oct-26-16 01:36PM  at Insider Monkey]
Stock chart of FIX Financial statements of FIX Annual reports of FIX
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.