Intrinsic value of ABM Industries Incorporated - ABM

Previous Close

$38.34

  Intrinsic Value

$39.39

stock screener

  Rating & Target

hold

+3%

Previous close

$38.34

 
Intrinsic value

$39.39

 
Up/down potential

+3%

 
Rating

hold

We calculate the intrinsic value of ABM 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 0001), $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 2.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  6,571
  6,722
  6,895
  7,089
  7,304
  7,539
  7,796
  8,074
  8,374
  8,695
  9,039
  9,406
  9,796
  10,211
  10,652
  11,118
  11,613
  12,135
  12,687
  13,270
  13,885
  14,534
  15,218
  15,938
  16,697
  17,496
  18,337
  19,222
  20,152
  21,132
Variable operating expenses, $m
  6,323
  6,464
  6,624
  6,804
  7,004
  7,223
  7,462
  7,720
  7,998
  8,297
  8,397
  8,738
  9,100
  9,486
  9,895
  10,329
  10,788
  11,273
  11,786
  12,328
  12,899
  13,502
  14,137
  14,806
  15,511
  16,253
  17,035
  17,857
  18,721
  19,631
Fixed operating expenses, $m
  104
  107
  109
  111
  114
  116
  119
  121
  124
  127
  130
  132
  135
  138
  141
  144
  148
  151
  154
  158
  161
  165
  168
  172
  176
  180
  184
  188
  192
  196
Total operating expenses, $m
  6,427
  6,571
  6,733
  6,915
  7,118
  7,339
  7,581
  7,841
  8,122
  8,424
  8,527
  8,870
  9,235
  9,624
  10,036
  10,473
  10,936
  11,424
  11,940
  12,486
  13,060
  13,667
  14,305
  14,978
  15,687
  16,433
  17,219
  18,045
  18,913
  19,827
Operating income, $m
  143
  152
  162
  173
  186
  200
  216
  233
  251
  272
  512
  535
  560
  587
  615
  645
  677
  711
  747
  785
  825
  867
  912
  960
  1,010
  1,063
  1,119
  1,177
  1,239
  1,305
EBITDA, $m
  423
  433
  444
  458
  472
  489
  507
  527
  548
  571
  596
  622
  651
  681
  713
  748
  784
  823
  864
  907
  953
  1,002
  1,053
  1,107
  1,164
  1,225
  1,288
  1,355
  1,426
  1,500
Interest expense (income), $m
  8
  51
  53
  56
  59
  62
  66
  71
  75
  80
  86
  92
  98
  105
  112
  119
  127
  136
  145
  154
  164
  175
  186
  198
  211
  224
  237
  252
  267
  283
  300
Earnings before tax, $m
  93
  99
  106
  114
  123
  134
  145
  157
  171
  186
  421
  437
  456
  475
  496
  518
  541
  566
  592
  620
  650
  681
  714
  749
  786
  825
  867
  910
  956
  1,004
Tax expense, $m
  25
  27
  29
  31
  33
  36
  39
  43
  46
  50
  114
  118
  123
  128
  134
  140
  146
  153
  160
  167
  175
  184
  193
  202
  212
  223
  234
  246
  258
  271
Net income, $m
  68
  72
  77
  83
  90
  98
  106
  115
  125
  136
  307
  319
  333
  347
  362
  378
  395
  413
  432
  453
  474
  497
  521
  547
  574
  602
  633
  664
  698
  733

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  3,700
  3,785
  3,882
  3,991
  4,112
  4,245
  4,390
  4,546
  4,715
  4,896
  5,089
  5,296
  5,516
  5,750
  5,998
  6,260
  6,539
  6,833
  7,144
  7,472
  7,818
  8,184
  8,569
  8,974
  9,401
  9,851
  10,325
  10,823
  11,347
  11,898
Adjusted assets (=assets-cash), $m
  3,700
  3,785
  3,882
  3,991
  4,112
  4,245
  4,390
  4,546
  4,715
  4,896
  5,089
  5,296
  5,516
  5,750
  5,998
  6,260
  6,539
  6,833
  7,144
  7,472
  7,818
  8,184
  8,569
  8,974
  9,401
  9,851
  10,325
  10,823
  11,347
  11,898
Revenue / Adjusted assets
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
  1.776
Average production assets, $m
  1,288
  1,318
  1,351
  1,389
  1,432
  1,478
  1,528
  1,583
  1,641
  1,704
  1,772
  1,843
  1,920
  2,001
  2,088
  2,179
  2,276
  2,378
  2,487
  2,601
  2,722
  2,849
  2,983
  3,124
  3,273
  3,429
  3,594
  3,767
  3,950
  4,142
Working capital, $m
  381
  390
  400
  411
  424
  437
  452
  468
  486
  504
  524
  546
  568
  592
  618
  645
  674
  704
  736
  770
  805
  843
  883
  924
  968
  1,015
  1,064
  1,115
  1,169
  1,226
Total debt, $m
  982
  1,033
  1,092
  1,157
  1,229
  1,309
  1,396
  1,489
  1,590
  1,699
  1,815
  1,938
  2,070
  2,210
  2,359
  2,516
  2,683
  2,859
  3,045
  3,242
  3,449
  3,668
  3,899
  4,142
  4,398
  4,667
  4,951
  5,249
  5,563
  5,893
Total liabilities, $m
  2,216
  2,267
  2,325
  2,391
  2,463
  2,543
  2,629
  2,723
  2,824
  2,933
  3,049
  3,172
  3,304
  3,444
  3,593
  3,750
  3,917
  4,093
  4,279
  4,476
  4,683
  4,902
  5,133
  5,376
  5,631
  5,901
  6,184
  6,483
  6,797
  7,127
Total equity, $m
  1,484
  1,518
  1,557
  1,601
  1,649
  1,702
  1,760
  1,823
  1,891
  1,963
  2,041
  2,124
  2,212
  2,306
  2,405
  2,510
  2,622
  2,740
  2,865
  2,996
  3,135
  3,282
  3,436
  3,599
  3,770
  3,950
  4,140
  4,340
  4,550
  4,771
Total liabilities and equity, $m
  3,700
  3,785
  3,882
  3,992
  4,112
  4,245
  4,389
  4,546
  4,715
  4,896
  5,090
  5,296
  5,516
  5,750
  5,998
  6,260
  6,539
  6,833
  7,144
  7,472
  7,818
  8,184
  8,569
  8,975
  9,401
  9,851
  10,324
  10,823
  11,347
  11,898
Debt-to-equity ratio
  0.660
  0.680
  0.700
  0.720
  0.750
  0.770
  0.790
  0.820
  0.840
  0.870
  0.890
  0.910
  0.940
  0.960
  0.980
  1.000
  1.020
  1.040
  1.060
  1.080
  1.100
  1.120
  1.130
  1.150
  1.170
  1.180
  1.200
  1.210
  1.220
  1.240
Adjusted equity ratio
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401
  0.401

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  68
  72
  77
  83
  90
  98
  106
  115
  125
  136
  307
  319
  333
  347
  362
  378
  395
  413
  432
  453
  474
  497
  521
  547
  574
  602
  633
  664
  698
  733
Depreciation, amort., depletion, $m
  280
  281
  283
  285
  287
  289
  291
  294
  297
  299
  84
  87
  91
  94
  98
  103
  107
  112
  117
  123
  128
  134
  141
  147
  154
  162
  170
  178
  186
  195
Funds from operations, $m
  347
  353
  360
  368
  377
  386
  397
  409
  421
  435
  391
  406
  423
  441
  460
  481
  502
  525
  550
  575
  603
  632
  662
  694
  728
  764
  802
  842
  884
  928
Change in working capital, $m
  7
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  27
  29
  30
  32
  34
  36
  38
  40
  42
  44
  46
  49
  51
  54
  57
Cash from operations, $m
  340
  344
  350
  357
  364
  373
  382
  393
  404
  416
  371
  385
  401
  417
  435
  454
  474
  495
  518
  542
  567
  594
  622
  653
  684
  718
  753
  791
  830
  872
Maintenance CAPEX, $m
  -60
  -61
  -62
  -64
  -66
  -68
  -70
  -72
  -75
  -77
  -80
  -84
  -87
  -91
  -94
  -98
  -103
  -107
  -112
  -117
  -123
  -128
  -134
  -141
  -147
  -154
  -162
  -170
  -178
  -186
New CAPEX, $m
  -25
  -30
  -34
  -38
  -42
  -46
  -50
  -54
  -59
  -63
  -67
  -72
  -77
  -81
  -86
  -91
  -97
  -102
  -108
  -114
  -121
  -127
  -134
  -141
  -149
  -157
  -165
  -173
  -182
  -192
Cash from investing activities, $m
  -85
  -91
  -96
  -102
  -108
  -114
  -120
  -126
  -134
  -140
  -147
  -156
  -164
  -172
  -180
  -189
  -200
  -209
  -220
  -231
  -244
  -255
  -268
  -282
  -296
  -311
  -327
  -343
  -360
  -378
Free cash flow, $m
  255
  254
  254
  255
  257
  259
  262
  266
  271
  276
  223
  230
  237
  245
  254
  264
  274
  285
  297
  310
  324
  338
  354
  371
  388
  407
  427
  448
  470
  493
Issuance/(repayment) of debt, $m
  43
  51
  58
  65
  72
  80
  87
  94
  101
  108
  116
  124
  132
  140
  149
  157
  167
  176
  186
  197
  207
  219
  231
  243
  256
  269
  284
  298
  314
  330
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  43
  51
  58
  65
  72
  80
  87
  94
  101
  108
  116
  124
  132
  140
  149
  157
  167
  176
  186
  197
  207
  219
  231
  243
  256
  269
  284
  298
  314
  330
Total cash flow (excl. dividends), $m
  299
  305
  312
  320
  329
  338
  349
  360
  372
  384
  339
  353
  369
  385
  403
  421
  441
  461
  483
  507
  531
  557
  585
  614
  644
  676
  710
  746
  784
  824
Retained Cash Flow (-), $m
  -29
  -34
  -39
  -44
  -49
  -53
  -58
  -63
  -68
  -73
  -78
  -83
  -88
  -94
  -99
  -105
  -112
  -118
  -125
  -132
  -139
  -146
  -154
  -163
  -171
  -180
  -190
  -200
  -210
  -221
Prev. year cash balance distribution, $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 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
  270
  271
  273
  277
  280
  285
  291
  297
  304
  312
  261
  270
  281
  291
  303
  316
  329
  344
  359
  375
  392
  411
  430
  451
  473
  496
  521
  546
  574
  603
Discount rate, %
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
  255
  241
  228
  214
  201
  187
  174
  160
  147
  134
  98
  89
  79
  70
  61
  53
  45
  38
  31
  25
  20
  16
  12
  9
  7
  5
  4
  2
  2
  1
Current shareholders' claim on cash, %
  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

ABM Industries Incorporated is a provider of integrated facility solutions. The Company operates through five segments: Janitorial, Facility Services, Parking, Building & Energy Solutions, and other. Its Janitorial segment provides a range of cleaning services for commercial office buildings, data centers, educational institutions, government buildings, health facilities, industrial buildings, retail stores, sport event facilities and transportation hubs. Its Facility Services segment provides onsite mechanical engineering and technical services and solutions relating to a range of facilities and infrastructure systems. Its Parking segment provides parking and transportation services. Its Building & Energy Solutions segment provides energy solutions; electrical; heating, ventilation and air conditioning; lighting, and other general maintenance and repair services for clients. Its other segment provides facility solutions to airlines and airports.

FINANCIAL RATIOS  of  ABM Industries Incorporated (ABM)

Valuation Ratios
P/E Ratio 627.8
Price to Sales 0.5
Price to Book 1.8
Price to Tangible Book
Price to Cash Flow 418.5
Price to Free Cash Flow -49.2
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 29.5%
Cap. Spend. - 3 Yr. Gr. Rate 9%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 84.4%
Total Debt to Equity 85.6%
Interest Coverage 12
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. 2.3%
Return On Total Capital 0.2%
Ret/ On T. Cap. - 3 Yr. Avg. 3.7%
Return On Equity 0.3%
Return On Equity - 3 Yr. Avg. 4.6%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 10.5%
Gross Margin - 3 Yr. Avg. 10.2%
EBITDA Margin 3%
EBITDA Margin - 3 Yr. Avg. 2.7%
Operating Margin 1.9%
Oper. Margin - 3 Yr. Avg. 1.5%
Pre-Tax Margin 1.6%
Pre-Tax Margin - 3 Yr. Avg. 1.4%
Net Profit Margin 0.1%
Net Profit Margin - 3 Yr. Avg. 0.9%
Effective Tax Rate 10.3%
Eff/ Tax Rate - 3 Yr. Avg. 5.4%
Payout Ratio 1000%

ABM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ABM stock intrinsic value calculation we used $6442 million for the last fiscal year's total revenue generated by ABM Industries Incorporated. The default revenue input number comes from 0001 income statement of ABM Industries Incorporated. 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 ABM 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 5.7%, whose default value for ABM is calculated based on our internal credit rating of ABM Industries Incorporated, 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 ABM Industries Incorporated.
    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 ABM stock the variable cost ratio is equal to 96.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $102 million in the base year in the intrinsic value calculation for ABM 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 5.4% for ABM Industries Incorporated.

Corporate tax rate of 27% is the nominal tax rate for ABM Industries Incorporated. 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 ABM 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 ABM are equal to 19.6%.

Life of production assets of 21.2 years is the average useful life of capital assets used in ABM Industries Incorporated 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 ABM is equal to 5.8%. 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 - $1454.6 million for ABM Industries Incorporated - 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 66.241 million for ABM Industries Incorporated 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 ABM Industries Incorporated at the current share price and the inputted number of shares is $2.5 billion.

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