Intrinsic value of AECOM - ACM

Previous Close

$37.53

  Intrinsic Value

$58.46

stock screener

  Rating & Target

str. buy

+56%

Previous close

$37.53

 
Intrinsic value

$58.46

 
Up/down potential

+56%

 
Rating

str. buy

We calculate the intrinsic value of ACM 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 5.9

 

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, %
  2.60
  2.84
  3.06
  3.25
  3.43
  3.58
  3.72
  3.85
  3.97
  4.07
  4.16
  4.25
  4.32
  4.39
  4.45
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.76
  4.79
  4.81
  4.83
  4.84
  4.86
  4.87
  4.89
Revenue, $m
  20,680
  21,267
  21,917
  22,630
  23,405
  24,243
  25,146
  26,115
  27,151
  28,256
  29,432
  30,682
  32,009
  33,414
  34,901
  36,473
  38,135
  39,889
  41,740
  43,691
  45,749
  47,916
  50,198
  52,602
  55,131
  57,793
  60,593
  63,538
  66,635
  69,891
Variable operating expenses, $m
  20,085
  20,637
  21,249
  21,919
  22,649
  23,438
  24,288
  25,199
  26,174
  27,214
  27,697
  28,873
  30,121
  31,443
  32,843
  34,323
  35,886
  37,537
  39,279
  41,115
  43,051
  45,091
  47,239
  49,500
  51,880
  54,385
  57,020
  59,791
  62,706
  65,770
Fixed operating expenses, $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 operating expenses, $m
  20,085
  20,637
  21,249
  21,919
  22,649
  23,438
  24,288
  25,199
  26,174
  27,214
  27,697
  28,873
  30,121
  31,443
  32,843
  34,323
  35,886
  37,537
  39,279
  41,115
  43,051
  45,091
  47,239
  49,500
  51,880
  54,385
  57,020
  59,791
  62,706
  65,770
Operating income, $m
  595
  630
  668
  710
  756
  805
  859
  916
  977
  1,042
  1,735
  1,809
  1,887
  1,970
  2,058
  2,151
  2,249
  2,352
  2,461
  2,576
  2,697
  2,825
  2,960
  3,102
  3,251
  3,408
  3,573
  3,746
  3,929
  4,121
EBITDA, $m
  1,369
  1,408
  1,451
  1,499
  1,550
  1,605
  1,665
  1,729
  1,798
  1,871
  1,949
  2,032
  2,120
  2,213
  2,311
  2,415
  2,525
  2,642
  2,764
  2,893
  3,030
  3,173
  3,324
  3,483
  3,651
  3,827
  4,013
  4,208
  4,413
  4,628
Interest expense (income), $m
  226
  261
  281
  303
  327
  354
  384
  415
  450
  486
  525
  567
  612
  659
  709
  762
  818
  878
  941
  1,007
  1,077
  1,151
  1,228
  1,310
  1,397
  1,488
  1,583
  1,684
  1,790
  1,901
  2,018
Earnings before tax, $m
  334
  349
  365
  383
  402
  422
  443
  466
  491
  517
  1,168
  1,198
  1,228
  1,261
  1,296
  1,332
  1,371
  1,411
  1,454
  1,499
  1,547
  1,597
  1,649
  1,705
  1,763
  1,824
  1,889
  1,957
  2,028
  2,103
Tax expense, $m
  90
  94
  99
  103
  108
  114
  120
  126
  132
  139
  315
  323
  332
  341
  350
  360
  370
  381
  393
  405
  418
  431
  445
  460
  476
  493
  510
  528
  548
  568
Net income, $m
  244
  255
  267
  279
  293
  308
  324
  340
  358
  377
  853
  874
  897
  921
  946
  973
  1,001
  1,030
  1,062
  1,094
  1,129
  1,166
  1,204
  1,245
  1,287
  1,332
  1,379
  1,428
  1,480
  1,535

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
  15,062
  15,490
  15,963
  16,482
  17,047
  17,657
  18,315
  19,020
  19,775
  20,580
  21,437
  22,347
  23,313
  24,336
  25,419
  26,565
  27,775
  29,052
  30,400
  31,822
  33,320
  34,899
  36,561
  38,311
  40,154
  42,092
  44,131
  46,276
  48,532
  50,904
Adjusted assets (=assets-cash), $m
  15,062
  15,490
  15,963
  16,482
  17,047
  17,657
  18,315
  19,020
  19,775
  20,580
  21,437
  22,347
  23,313
  24,336
  25,419
  26,565
  27,775
  29,052
  30,400
  31,822
  33,320
  34,899
  36,561
  38,311
  40,154
  42,092
  44,131
  46,276
  48,532
  50,904
Revenue / Adjusted assets
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
  1.373
Average production assets, $m
  3,888
  3,998
  4,120
  4,254
  4,400
  4,558
  4,728
  4,910
  5,104
  5,312
  5,533
  5,768
  6,018
  6,282
  6,561
  6,857
  7,169
  7,499
  7,847
  8,214
  8,601
  9,008
  9,437
  9,889
  10,365
  10,865
  11,391
  11,945
  12,527
  13,140
Working capital, $m
  269
  276
  285
  294
  304
  315
  327
  339
  353
  367
  383
  399
  416
  434
  454
  474
  496
  519
  543
  568
  595
  623
  653
  684
  717
  751
  788
  826
  866
  909
Total debt, $m
  3,898
  4,207
  4,548
  4,922
  5,329
  5,769
  6,243
  6,752
  7,296
  7,876
  8,494
  9,151
  9,847
  10,585
  11,366
  12,192
  13,064
  13,985
  14,957
  15,982
  17,062
  18,200
  19,399
  20,661
  21,989
  23,387
  24,857
  26,404
  28,030
  29,740
Total liabilities, $m
  10,860
  11,168
  11,509
  11,883
  12,291
  12,731
  13,205
  13,714
  14,258
  14,838
  15,456
  16,112
  16,809
  17,546
  18,327
  19,153
  20,026
  20,947
  21,919
  22,944
  24,024
  25,162
  26,361
  27,623
  28,951
  30,348
  31,819
  33,365
  34,992
  36,702
Total equity, $m
  4,202
  4,322
  4,454
  4,598
  4,756
  4,926
  5,110
  5,307
  5,517
  5,742
  5,981
  6,235
  6,504
  6,790
  7,092
  7,412
  7,749
  8,106
  8,482
  8,878
  9,296
  9,737
  10,201
  10,689
  11,203
  11,744
  12,313
  12,911
  13,540
  14,202
Total liabilities and equity, $m
  15,062
  15,490
  15,963
  16,481
  17,047
  17,657
  18,315
  19,021
  19,775
  20,580
  21,437
  22,347
  23,313
  24,336
  25,419
  26,565
  27,775
  29,053
  30,401
  31,822
  33,320
  34,899
  36,562
  38,312
  40,154
  42,092
  44,132
  46,276
  48,532
  50,904
Debt-to-equity ratio
  0.930
  0.970
  1.020
  1.070
  1.120
  1.170
  1.220
  1.270
  1.320
  1.370
  1.420
  1.470
  1.510
  1.560
  1.600
  1.640
  1.690
  1.730
  1.760
  1.800
  1.840
  1.870
  1.900
  1.930
  1.960
  1.990
  2.020
  2.050
  2.070
  2.090
Adjusted equity ratio
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279
  0.279

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  244
  255
  267
  279
  293
  308
  324
  340
  358
  377
  853
  874
  897
  921
  946
  973
  1,001
  1,030
  1,062
  1,094
  1,129
  1,166
  1,204
  1,245
  1,287
  1,332
  1,379
  1,428
  1,480
  1,535
Depreciation, amort., depletion, $m
  774
  778
  783
  788
  794
  800
  807
  814
  821
  829
  214
  223
  232
  243
  253
  265
  277
  290
  303
  317
  332
  348
  364
  382
  400
  419
  440
  461
  484
  507
Funds from operations, $m
  1,018
  1,033
  1,050
  1,068
  1,087
  1,108
  1,130
  1,154
  1,179
  1,206
  1,067
  1,097
  1,129
  1,163
  1,199
  1,237
  1,277
  1,320
  1,365
  1,412
  1,461
  1,513
  1,568
  1,626
  1,687
  1,751
  1,819
  1,890
  1,964
  2,042
Change in working capital, $m
  7
  8
  8
  9
  10
  11
  12
  13
  13
  14
  15
  16
  17
  18
  19
  20
  22
  23
  24
  25
  27
  28
  30
  31
  33
  35
  36
  38
  40
  42
Cash from operations, $m
  1,011
  1,026
  1,041
  1,059
  1,077
  1,097
  1,118
  1,141
  1,166
  1,192
  1,051
  1,081
  1,112
  1,145
  1,180
  1,217
  1,256
  1,297
  1,340
  1,386
  1,434
  1,485
  1,539
  1,595
  1,654
  1,717
  1,782
  1,851
  1,924
  2,000
Maintenance CAPEX, $m
  -146
  -150
  -154
  -159
  -164
  -170
  -176
  -183
  -190
  -197
  -205
  -214
  -223
  -232
  -243
  -253
  -265
  -277
  -290
  -303
  -317
  -332
  -348
  -364
  -382
  -400
  -419
  -440
  -461
  -484
New CAPEX, $m
  -108
  -110
  -122
  -134
  -146
  -158
  -170
  -182
  -195
  -208
  -221
  -235
  -249
  -264
  -280
  -296
  -312
  -330
  -348
  -367
  -387
  -407
  -429
  -452
  -476
  -500
  -526
  -554
  -582
  -612
Cash from investing activities, $m
  -254
  -260
  -276
  -293
  -310
  -328
  -346
  -365
  -385
  -405
  -426
  -449
  -472
  -496
  -523
  -549
  -577
  -607
  -638
  -670
  -704
  -739
  -777
  -816
  -858
  -900
  -945
  -994
  -1,043
  -1,096
Free cash flow, $m
  757
  765
  765
  766
  767
  769
  773
  777
  782
  787
  625
  632
  640
  648
  658
  668
  679
  690
  703
  716
  731
  746
  762
  779
  797
  816
  836
  858
  880
  904
Issuance/(repayment) of debt, $m
  271
  308
  341
  374
  407
  440
  474
  509
  544
  580
  618
  656
  696
  738
  781
  826
  872
  921
  972
  1,025
  1,080
  1,138
  1,199
  1,262
  1,328
  1,398
  1,470
  1,547
  1,626
  1,710
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  
  271
  308
  341
  374
  407
  440
  474
  509
  544
  580
  618
  656
  696
  738
  781
  826
  872
  921
  972
  1,025
  1,080
  1,138
  1,199
  1,262
  1,328
  1,398
  1,470
  1,547
  1,626
  1,710
Total cash flow (excl. dividends), $m
  1,029
  1,074
  1,106
  1,140
  1,174
  1,210
  1,247
  1,285
  1,326
  1,367
  1,243
  1,288
  1,336
  1,386
  1,439
  1,494
  1,551
  1,612
  1,675
  1,741
  1,811
  1,884
  1,960
  2,041
  2,125
  2,214
  2,307
  2,404
  2,507
  2,614
Retained Cash Flow (-), $m
  -110
  -119
  -132
  -145
  -158
  -170
  -183
  -197
  -211
  -225
  -239
  -254
  -269
  -286
  -302
  -320
  -338
  -356
  -376
  -397
  -418
  -440
  -464
  -488
  -514
  -541
  -569
  -598
  -629
  -662
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
  919
  954
  974
  995
  1,017
  1,039
  1,063
  1,089
  1,115
  1,143
  1,004
  1,034
  1,067
  1,101
  1,137
  1,174
  1,214
  1,255
  1,299
  1,345
  1,393
  1,443
  1,497
  1,553
  1,611
  1,673
  1,738
  1,806
  1,877
  1,952
Discount rate, %
  6.00
  6.30
  6.62
  6.95
  7.29
  7.66
  8.04
  8.44
  8.86
  9.31
  9.77
  10.26
  10.78
  11.31
  11.88
  12.47
  13.10
  13.75
  14.44
  15.16
  15.92
  16.72
  17.55
  18.43
  19.35
  20.32
  21.33
  22.40
  23.52
  24.70
PV of cash for distribution, $m
  867
  845
  804
  761
  715
  668
  619
  569
  519
  469
  360
  320
  282
  245
  211
  179
  150
  123
  100
  80
  63
  48
  36
  27
  19
  14
  9
  6
  4
  3
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

AECOM is engaged in designing, building, financing and operating infrastructure assets for governments, businesses and organizations. The Company's segments include design and consulting services (DCS), construction services (CS) and management services (MS). Its DCS segment is engaged in planning, consulting, architectural and engineering design services to commercial and government clients in major end markets, such as transportation, facilities, environmental, energy, water and government. Its CS segment is engaged in construction services, including building construction and energy, infrastructure and industrial construction, primarily in the Americas. Its MS segment is engaged in programming and facilitating management and maintenance, training, logistics, consulting, technical assistance, and systems integration and information technology services, primarily for agencies of the United States government and other national governments.

FINANCIAL RATIOS  of  AECOM (ACM)

Valuation Ratios
P/E Ratio 17.4
Price to Sales 0.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 8.5
Price to Free Cash Flow 9.7
Growth Rates
Sales Growth Rate 4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55%
Cap. Spend. - 3 Yr. Gr. Rate 6.4%
Financial Strength
Quick Ratio 6
Current Ratio 0
LT Debt to Equity 92.6%
Total Debt to Equity 96.2%
Interest Coverage 3
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 4.4%
Ret/ On T. Cap. - 3 Yr. Avg. 1%
Return On Equity 9.2%
Return On Equity - 3 Yr. Avg. 2.2%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 3.8%
Gross Margin - 3 Yr. Avg. 3.5%
EBITDA Margin 5.1%
EBITDA Margin - 3 Yr. Avg. 4.3%
Operating Margin 3.6%
Oper. Margin - 3 Yr. Avg. 2.2%
Pre-Tax Margin 2.4%
Pre-Tax Margin - 3 Yr. Avg. 0.7%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 0.5%
Effective Tax Rate 1.9%
Eff/ Tax Rate - 3 Yr. Avg. 8.5%
Payout Ratio 0%

ACM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ACM stock intrinsic value calculation we used $20156 million for the last fiscal year's total revenue generated by AECOM. The default revenue input number comes from 0001 income statement of AECOM. 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 ACM stock valuation model: a) initial revenue growth rate of 2.6% 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 6%, whose default value for ACM is calculated based on our internal credit rating of AECOM, 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 AECOM.
    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 ACM stock the variable cost ratio is equal to 97.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for ACM 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 7.2% for AECOM.

Corporate tax rate of 27% is the nominal tax rate for AECOM. 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 ACM 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 ACM are equal to 18.8%.

Life of production assets of 25.9 years is the average useful life of capital assets used in AECOM 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 ACM is equal to 1.3%. 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 - $4092.78 million for AECOM - 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 156.003 million for AECOM 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 AECOM at the current share price and the inputted number of shares is $5.9 billion.

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