Intrinsic value of Comfort Systems USA - FIX

Previous Close

$43.10

  Intrinsic Value

$73.25

stock screener

  Rating & Target

str. buy

+70%

Previous close

$43.10

 
Intrinsic value

$73.25

 
Up/down potential

+70%

 
Rating

str. buy

*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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  12.10
  11.39
  10.75
  10.18
  9.66
  9.19
  8.77
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.80
  6.62
  6.46
  6.32
  6.18
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
Revenue, $m
  1,634
  1,832
  2,040
  2,260
  2,490
  2,730
  2,981
  3,243
  3,515
  3,798
  4,092
  4,398
  4,716
  5,047
  5,390
  5,747
  6,118
  6,505
  6,907
  7,326
  7,763
  8,218
  8,693
  9,188
  9,705
  10,245
  10,810
  11,400
  12,017
  12,663
  13,338
Variable operating expenses, $m
 
  1,486
  1,653
  1,829
  2,014
  2,207
  2,408
  2,618
  2,837
  3,064
  3,301
  3,531
  3,787
  4,052
  4,328
  4,614
  4,912
  5,223
  5,546
  5,882
  6,233
  6,598
  6,979
  7,377
  7,792
  8,226
  8,679
  9,153
  9,648
  10,167
  10,709
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
  1,703
  1,876
  2,057
  2,248
  2,447
  2,654
  2,870
  3,095
  3,329
  3,572
  3,809
  4,072
  4,344
  4,628
  4,921
  5,227
  5,546
  5,877
  6,221
  6,580
  6,954
  7,344
  7,751
  8,175
  8,619
  9,082
  9,566
  10,071
  10,601
  11,154
Operating income, $m
  102
  129
  165
  202
  242
  283
  327
  372
  420
  469
  520
  589
  645
  703
  763
  826
  891
  960
  1,031
  1,105
  1,183
  1,264
  1,348
  1,437
  1,530
  1,627
  1,728
  1,834
  1,946
  2,062
  2,184
EBITDA, $m
  128
  156
  193
  232
  273
  317
  362
  409
  458
  509
  563
  618
  676
  736
  799
  864
  932
  1,003
  1,077
  1,154
  1,235
  1,319
  1,407
  1,499
  1,595
  1,695
  1,800
  1,911
  2,026
  2,147
  2,274
Interest expense (income), $m
  2
  1
  11
  23
  34
  47
  60
  73
  88
  102
  118
  133
  150
  167
  185
  204
  223
  243
  264
  286
  308
  332
  357
  382
  409
  437
  466
  497
  529
  562
  597
Earnings before tax, $m
  101
  128
  153
  180
  207
  237
  267
  299
  332
  367
  403
  455
  494
  535
  578
  622
  668
  717
  767
  819
  874
  932
  992
  1,055
  1,121
  1,189
  1,262
  1,337
  1,417
  1,500
  1,587
Tax expense, $m
  36
  35
  41
  49
  56
  64
  72
  81
  90
  99
  109
  123
  134
  145
  156
  168
  180
  193
  207
  221
  236
  252
  268
  285
  303
  321
  341
  361
  383
  405
  429
Net income, $m
  65
  94
  112
  131
  151
  173
  195
  218
  242
  268
  294
  332
  361
  391
  422
  454
  488
  523
  560
  598
  638
  680
  724
  770
  818
  868
  921
  976
  1,034
  1,095
  1,159

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
  759
  845
  936
  1,031
  1,131
  1,235
  1,343
  1,456
  1,573
  1,695
  1,822
  1,954
  2,091
  2,233
  2,381
  2,535
  2,695
  2,861
  3,035
  3,216
  3,404
  3,601
  3,806
  4,020
  4,244
  4,478
  4,722
  4,978
  5,245
  5,525
Adjusted assets (=assets-cash), $m
  677
  759
  845
  936
  1,031
  1,131
  1,235
  1,343
  1,456
  1,573
  1,695
  1,822
  1,954
  2,091
  2,233
  2,381
  2,535
  2,695
  2,861
  3,035
  3,216
  3,404
  3,601
  3,806
  4,020
  4,244
  4,478
  4,722
  4,978
  5,245
  5,525
Revenue / Adjusted assets
  2.414
  2.414
  2.414
  2.415
  2.415
  2.414
  2.414
  2.415
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.413
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
  2.414
Average production assets, $m
  106
  119
  133
  147
  162
  177
  194
  211
  228
  247
  266
  286
  307
  328
  350
  374
  398
  423
  449
  476
  505
  534
  565
  597
  631
  666
  703
  741
  781
  823
  867
Working capital, $m
  98
  75
  84
  93
  102
  112
  122
  133
  144
  156
  168
  180
  193
  207
  221
  236
  251
  267
  283
  300
  318
  337
  356
  377
  398
  420
  443
  467
  493
  519
  547
Total debt, $m
  3
  42
  84
  129
  175
  224
  275
  328
  383
  440
  500
  562
  626
  693
  763
  835
  910
  989
  1,070
  1,155
  1,243
  1,336
  1,432
  1,532
  1,637
  1,746
  1,861
  1,980
  2,105
  2,236
  2,373
Total liabilities, $m
  332
  371
  413
  458
  504
  553
  604
  657
  712
  769
  829
  891
  955
  1,022
  1,092
  1,164
  1,239
  1,318
  1,399
  1,484
  1,572
  1,665
  1,761
  1,861
  1,966
  2,075
  2,190
  2,309
  2,434
  2,565
  2,702
Total equity, $m
  377
  388
  432
  478
  527
  578
  631
  686
  744
  804
  866
  931
  998
  1,068
  1,141
  1,217
  1,295
  1,377
  1,462
  1,551
  1,643
  1,740
  1,840
  1,945
  2,054
  2,169
  2,288
  2,413
  2,544
  2,680
  2,823
Total liabilities and equity, $m
  709
  759
  845
  936
  1,031
  1,131
  1,235
  1,343
  1,456
  1,573
  1,695
  1,822
  1,953
  2,090
  2,233
  2,381
  2,534
  2,695
  2,861
  3,035
  3,215
  3,405
  3,601
  3,806
  4,020
  4,244
  4,478
  4,722
  4,978
  5,245
  5,525
Debt-to-equity ratio
  0.008
  0.110
  0.200
  0.270
  0.330
  0.390
  0.440
  0.480
  0.510
  0.550
  0.580
  0.600
  0.630
  0.650
  0.670
  0.690
  0.700
  0.720
  0.730
  0.740
  0.760
  0.770
  0.780
  0.790
  0.800
  0.810
  0.810
  0.820
  0.830
  0.830
  0.840
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
  94
  112
  131
  151
  173
  195
  218
  242
  268
  294
  332
  361
  391
  422
  454
  488
  523
  560
  598
  638
  680
  724
  770
  818
  868
  921
  976
  1,034
  1,095
  1,159
Depreciation, amort., depletion, $m
  26
  27
  29
  30
  32
  33
  35
  37
  38
  40
  42
  29
  32
  34
  36
  39
  41
  44
  46
  49
  52
  55
  58
  62
  65
  69
  72
  76
  81
  85
  89
Funds from operations, $m
  88
  121
  141
  161
  183
  206
  230
  255
  281
  308
  336
  362
  393
  425
  458
  493
  529
  567
  606
  647
  690
  735
  782
  832
  883
  937
  993
  1,053
  1,115
  1,180
  1,248
Change in working capital, $m
  -3
  8
  9
  9
  9
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  15
  16
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  28
Cash from operations, $m
  91
  113
  132
  152
  174
  196
  220
  244
  270
  296
  324
  349
  380
  411
  444
  478
  514
  551
  590
  630
  672
  717
  763
  811
  862
  915
  970
  1,028
  1,089
  1,153
  1,221
Maintenance CAPEX, $m
  0
  -11
  -12
  -14
  -15
  -17
  -18
  -20
  -22
  -24
  -25
  -27
  -29
  -32
  -34
  -36
  -39
  -41
  -44
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -72
  -76
  -81
  -85
New CAPEX, $m
  -23
  -14
  -14
  -14
  -15
  -16
  -16
  -17
  -18
  -18
  -19
  -20
  -21
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -38
  -40
  -42
  -44
Cash from investing activities, $m
  -79
  -25
  -26
  -28
  -30
  -33
  -34
  -37
  -40
  -42
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -73
  -77
  -82
  -86
  -90
  -96
  -100
  -106
  -110
  -116
  -123
  -129
Free cash flow, $m
  12
  88
  106
  124
  144
  164
  185
  207
  230
  255
  280
  302
  329
  358
  388
  419
  451
  485
  520
  557
  595
  635
  677
  721
  767
  815
  865
  918
  973
  1,031
  1,092
Issuance/(repayment) of debt, $m
  -11
  40
  42
  44
  47
  49
  51
  53
  55
  57
  60
  62
  64
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
  100
  105
  109
  114
  120
  125
  131
  137
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
  40
  42
  44
  47
  49
  51
  53
  55
  57
  60
  62
  64
  67
  70
  72
  75
  78
  81
  85
  88
  92
  96
  100
  105
  109
  114
  120
  125
  131
  137
Total cash flow (excl. dividends), $m
  -14
  128
  148
  169
  190
  212
  236
  260
  285
  312
  339
  364
  394
  425
  457
  491
  526
  563
  601
  641
  683
  727
  773
  821
  871
  924
  979
  1,037
  1,098
  1,162
  1,229
Retained Cash Flow (-), $m
  -30
  -42
  -44
  -46
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -105
  -109
  -114
  -119
  -125
  -131
  -137
  -143
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
 
  118
  104
  122
  141
  162
  183
  205
  228
  252
  277
  299
  327
  355
  385
  415
  448
  481
  516
  553
  591
  631
  673
  716
  762
  810
  860
  912
  967
  1,025
  1,086
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
 
  113
  95
  106
  116
  125
  133
  138
  142
  145
  145
  142
  139
  135
  129
  122
  114
  105
  95
  85
  75
  65
  56
  47
  39
  31
  25
  20
  15
  11
  8
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. is a provider of mechanical contracting services, which principally includes heating, ventilation and air conditioning (HVAC), plumbing, piping and controls, as well as off-site construction, electrical, monitoring and fire protection. As of December 31, 2016, the Company installed, maintained, repaired and replaced products and systems throughout its 35 operating units in 84 cities and 91 locations throughout the United States. The Company operates primarily in the commercial, industrial and institutional HVAC markets and offers services in the industrial, healthcare, education, office, technology, retail and government facilities. The Company provides a range of construction, renovation, expansion, maintenance, repair and replacement services for mechanical and related systems in commercial, industrial and institutional properties. The Company also provides remote monitoring of temperature, pressure, humidity and air flow for HVAC systems.

FINANCIAL RATIOS  of  Comfort Systems USA (FIX)

Valuation Ratios
P/E Ratio 24.7
Price to Sales 1
Price to Book 4.3
Price to Tangible Book
Price to Cash Flow 17.6
Price to Free Cash Flow 23.6
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 12.1% 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 37.342 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 $1.6 billion.

RELATED COMPANIES Price Int.Val. Rating
EME EMCOR Group 82.54 84.42  hold
IESC IES Holdings 17.45 13.65  sell
UTX United Technol 133.97 194.86  str.buy
WPCS WPCS Internati 1.20 0.13  str.sell
ABM ABM Industries 38.47 85.90  str.buy

COMPANY NEWS

▶ Comfort Systems posts 3Q profit   [Oct-26-17 07:35PM  Associated Press]
▶ Is Comfort Systems USA Incs (FIX) ROE Of 16.75% Sustainable?   [Sep-29-17 08:37PM  Simply Wall St.]
▶ Comfort Systems posts 2Q profit   [12:12AM  Associated Press]
▶ Comfort Systems USA Reports Second Quarter 2017 Results   [Jul-27-17 04:10PM  Business Wire]
▶ 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]
Financial statements of FIX
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

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

Copyright © X-FIN.com 2005-2018. All rigths reserved.