Intrinsic value of Comfort Systems USA, Inc. - FIX

Previous Close

$37.98

  Intrinsic Value

$269.32

stock screener

  Rating & Target

str. buy

+609%

Previous close

$37.98

 
Intrinsic value

$269.32

 
Up/down potential

+609%

 
Rating

str. buy

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 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 1.4

 

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, %
  27.60
  25.34
  23.31
  21.48
  19.83
  18.35
  17.01
  15.81
  14.73
  13.76
  12.88
  12.09
  11.38
  10.74
  10.17
  9.65
  9.19
  8.77
  8.39
  8.05
  7.75
  7.47
  7.23
  7.00
  6.80
  6.62
  6.46
  6.31
  6.18
  6.06
Revenue, $m
  2,786
  3,491
  4,305
  5,230
  6,266
  7,416
  8,678
  10,049
  11,530
  13,116
  14,805
  16,595
  18,484
  20,470
  22,552
  24,729
  27,001
  29,369
  31,834
  34,397
  37,062
  39,832
  42,710
  45,701
  48,810
  52,042
  55,404
  58,902
  62,544
  66,337
Variable operating expenses, $m
  2,417
  3,021
  3,718
  4,509
  5,396
  6,380
  7,460
  8,634
  9,901
  11,258
  12,671
  14,204
  15,820
  17,520
  19,302
  21,165
  23,110
  25,136
  27,246
  29,440
  31,721
  34,091
  36,554
  39,114
  41,775
  44,542
  47,419
  50,413
  53,530
  56,777
Fixed operating expenses, $m
  138
  141
  144
  147
  151
  154
  157
  161
  164
  168
  172
  175
  179
  183
  187
  191
  195
  200
  204
  209
  213
  218
  223
  228
  233
  238
  243
  248
  254
  259
Total operating expenses, $m
  2,555
  3,162
  3,862
  4,656
  5,547
  6,534
  7,617
  8,795
  10,065
  11,426
  12,843
  14,379
  15,999
  17,703
  19,489
  21,356
  23,305
  25,336
  27,450
  29,649
  31,934
  34,309
  36,777
  39,342
  42,008
  44,780
  47,662
  50,661
  53,784
  57,036
Operating income, $m
  230
  329
  443
  573
  720
  882
  1,060
  1,255
  1,464
  1,689
  1,962
  2,216
  2,485
  2,767
  3,063
  3,373
  3,696
  4,033
  4,384
  4,749
  5,128
  5,523
  5,932
  6,359
  6,802
  7,262
  7,742
  8,241
  8,760
  9,301
EBITDA, $m
  297
  404
  528
  669
  828
  1,004
  1,198
  1,409
  1,636
  1,880
  2,140
  2,416
  2,707
  3,014
  3,335
  3,670
  4,021
  4,387
  4,767
  5,163
  5,574
  6,002
  6,447
  6,909
  7,389
  7,889
  8,409
  8,950
  9,513
  10,100
Interest expense (income), $m
  2
  4
  13
  22
  34
  47
  61
  77
  95
  114
  135
  157
  180
  205
  232
  259
  288
  319
  351
  384
  418
  454
  491
  530
  570
  612
  655
  700
  747
  796
  847
Earnings before tax, $m
  226
  317
  421
  540
  673
  821
  983
  1,160
  1,350
  1,555
  1,805
  2,036
  2,279
  2,535
  2,804
  3,084
  3,377
  3,682
  4,000
  4,331
  4,674
  5,031
  5,403
  5,789
  6,190
  6,607
  7,042
  7,493
  7,964
  8,454
Tax expense, $m
  61
  85
  114
  146
  182
  222
  265
  313
  365
  420
  487
  550
  615
  685
  757
  833
  912
  994
  1,080
  1,169
  1,262
  1,358
  1,459
  1,563
  1,671
  1,784
  1,901
  2,023
  2,150
  2,283
Net income, $m
  165
  231
  307
  394
  491
  599
  718
  847
  986
  1,135
  1,318
  1,486
  1,664
  1,851
  2,047
  2,251
  2,465
  2,688
  2,920
  3,161
  3,412
  3,673
  3,944
  4,226
  4,519
  4,823
  5,140
  5,470
  5,814
  6,172

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
  1,356
  1,700
  2,096
  2,546
  3,051
  3,611
  4,225
  4,893
  5,613
  6,385
  7,208
  8,079
  8,999
  9,966
  10,980
  12,039
  13,146
  14,298
  15,498
  16,746
  18,044
  19,392
  20,793
  22,250
  23,763
  25,337
  26,974
  28,677
  30,450
  32,296
Adjusted assets (=assets-cash), $m
  1,356
  1,700
  2,096
  2,546
  3,051
  3,611
  4,225
  4,893
  5,613
  6,385
  7,208
  8,079
  8,999
  9,966
  10,980
  12,039
  13,146
  14,298
  15,498
  16,746
  18,044
  19,392
  20,793
  22,250
  23,763
  25,337
  26,974
  28,677
  30,450
  32,296
Revenue / Adjusted assets
  2.055
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
  2.054
Average production assets, $m
  312
  391
  482
  586
  702
  831
  972
  1,126
  1,291
  1,469
  1,658
  1,859
  2,070
  2,293
  2,526
  2,770
  3,024
  3,289
  3,565
  3,852
  4,151
  4,461
  4,783
  5,118
  5,467
  5,829
  6,205
  6,597
  7,005
  7,430
Working capital, $m
  128
  161
  198
  241
  288
  341
  399
  462
  530
  603
  681
  763
  850
  942
  1,037
  1,138
  1,242
  1,351
  1,464
  1,582
  1,705
  1,832
  1,965
  2,102
  2,245
  2,394
  2,549
  2,710
  2,877
  3,052
Total debt, $m
  233
  415
  625
  864
  1,132
  1,430
  1,756
  2,110
  2,493
  2,903
  3,340
  3,803
  4,291
  4,804
  5,343
  5,905
  6,493
  7,105
  7,742
  8,405
  9,094
  9,810
  10,554
  11,327
  12,131
  12,966
  13,835
  14,740
  15,681
  16,662
Total liabilities, $m
  720
  903
  1,113
  1,352
  1,620
  1,917
  2,243
  2,598
  2,981
  3,391
  3,827
  4,290
  4,779
  5,292
  5,830
  6,393
  6,980
  7,592
  8,230
  8,892
  9,581
  10,297
  11,041
  11,815
  12,618
  13,454
  14,323
  15,227
  16,169
  17,149
Total equity, $m
  636
  797
  983
  1,194
  1,431
  1,693
  1,981
  2,295
  2,633
  2,995
  3,380
  3,789
  4,221
  4,674
  5,149
  5,647
  6,165
  6,706
  7,269
  7,854
  8,463
  9,095
  9,752
  10,435
  11,145
  11,883
  12,651
  13,449
  14,281
  15,147
Total liabilities and equity, $m
  1,356
  1,700
  2,096
  2,546
  3,051
  3,610
  4,224
  4,893
  5,614
  6,386
  7,207
  8,079
  9,000
  9,966
  10,979
  12,040
  13,145
  14,298
  15,499
  16,746
  18,044
  19,392
  20,793
  22,250
  23,763
  25,337
  26,974
  28,676
  30,450
  32,296
Debt-to-equity ratio
  0.370
  0.520
  0.640
  0.720
  0.790
  0.840
  0.890
  0.920
  0.950
  0.970
  0.990
  1.000
  1.020
  1.030
  1.040
  1.050
  1.050
  1.060
  1.070
  1.070
  1.070
  1.080
  1.080
  1.090
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
Adjusted equity ratio
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469
  0.469

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  165
  231
  307
  394
  491
  599
  718
  847
  986
  1,135
  1,318
  1,486
  1,664
  1,851
  2,047
  2,251
  2,465
  2,688
  2,920
  3,161
  3,412
  3,673
  3,944
  4,226
  4,519
  4,823
  5,140
  5,470
  5,814
  6,172
Depreciation, amort., depletion, $m
  67
  75
  85
  96
  108
  122
  138
  154
  172
  191
  178
  200
  223
  247
  272
  298
  325
  354
  383
  414
  446
  480
  514
  550
  588
  627
  667
  709
  753
  799
Funds from operations, $m
  232
  306
  392
  490
  600
  721
  855
  1,001
  1,158
  1,326
  1,496
  1,686
  1,887
  2,097
  2,318
  2,549
  2,790
  3,042
  3,303
  3,576
  3,859
  4,153
  4,458
  4,776
  5,107
  5,450
  5,808
  6,180
  6,567
  6,970
Change in working capital, $m
  28
  32
  37
  43
  48
  53
  58
  63
  68
  73
  78
  82
  87
  91
  96
  100
  105
  109
  113
  118
  123
  127
  132
  138
  143
  149
  155
  161
  168
  174
Cash from operations, $m
  204
  274
  355
  447
  552
  669
  797
  938
  1,090
  1,253
  1,419
  1,604
  1,800
  2,006
  2,222
  2,449
  2,686
  2,933
  3,190
  3,458
  3,736
  4,025
  4,326
  4,639
  4,964
  5,301
  5,653
  6,019
  6,399
  6,796
Maintenance CAPEX, $m
  -26
  -34
  -42
  -52
  -63
  -75
  -89
  -105
  -121
  -139
  -158
  -178
  -200
  -223
  -247
  -272
  -298
  -325
  -354
  -383
  -414
  -446
  -480
  -514
  -550
  -588
  -627
  -667
  -709
  -753
New CAPEX, $m
  -67
  -79
  -91
  -104
  -116
  -129
  -141
  -154
  -166
  -178
  -189
  -201
  -212
  -222
  -233
  -244
  -254
  -265
  -276
  -287
  -298
  -310
  -322
  -335
  -348
  -362
  -377
  -392
  -408
  -425
Cash from investing activities, $m
  -93
  -113
  -133
  -156
  -179
  -204
  -230
  -259
  -287
  -317
  -347
  -379
  -412
  -445
  -480
  -516
  -552
  -590
  -630
  -670
  -712
  -756
  -802
  -849
  -898
  -950
  -1,004
  -1,059
  -1,117
  -1,178
Free cash flow, $m
  111
  161
  222
  292
  373
  464
  567
  679
  803
  936
  1,071
  1,225
  1,388
  1,561
  1,743
  1,934
  2,134
  2,342
  2,560
  2,787
  3,023
  3,269
  3,524
  3,789
  4,065
  4,352
  4,650
  4,960
  5,282
  5,618
Issuance/(repayment) of debt, $m
  156
  182
  210
  239
  268
  297
  326
  355
  383
  410
  437
  463
  488
  513
  538
  563
  587
  612
  637
  663
  689
  716
  744
  773
  804
  836
  869
  904
  941
  981
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  
  156
  182
  210
  239
  268
  297
  326
  355
  383
  410
  437
  463
  488
  513
  538
  563
  587
  612
  637
  663
  689
  716
  744
  773
  804
  836
  869
  904
  941
  981
Total cash flow (excl. dividends), $m
  267
  344
  432
  531
  641
  762
  893
  1,034
  1,185
  1,346
  1,508
  1,688
  1,877
  2,074
  2,281
  2,496
  2,721
  2,955
  3,197
  3,450
  3,712
  3,985
  4,268
  4,562
  4,869
  5,187
  5,519
  5,864
  6,224
  6,598
Retained Cash Flow (-), $m
  -138
  -161
  -186
  -211
  -237
  -262
  -288
  -313
  -338
  -362
  -386
  -409
  -431
  -453
  -475
  -497
  -519
  -541
  -563
  -585
  -609
  -632
  -657
  -683
  -710
  -738
  -768
  -799
  -832
  -866
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
  129
  182
  246
  320
  404
  499
  605
  721
  847
  984
  1,122
  1,279
  1,445
  1,621
  1,806
  1,999
  2,202
  2,414
  2,635
  2,864
  3,104
  3,352
  3,611
  3,880
  4,159
  4,449
  4,751
  5,065
  5,392
  5,732
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
  123
  167
  214
  263
  313
  362
  409
  451
  487
  516
  533
  546
  550
  544
  530
  508
  479
  445
  406
  364
  321
  278
  237
  198
  162
  130
  102
  78
  59
  43
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

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, Inc. (FIX)

Valuation Ratios
P/E Ratio 21.7
Price to Sales 0.9
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 15.5
Price to Free Cash Flow 20.8
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 $2183 million for the last fiscal year's total revenue generated by Comfort Systems USA, Inc.. The default revenue input number comes from 0001 income statement of Comfort Systems USA, Inc.. 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 27.6% 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 4.3%, whose default value for FIX is calculated based on our internal credit rating of Comfort Systems USA, Inc., 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, Inc..
    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 87.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $135 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 5.4% for Comfort Systems USA, Inc..

Corporate tax rate of 27% is the nominal tax rate for Comfort Systems USA, Inc.. 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 11.2%.

Life of production assets of 9.3 years is the average useful life of capital assets used in Comfort Systems USA, Inc. 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 4.6%. 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 - $498.047 million for Comfort Systems USA, Inc. - 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 36.790 million for Comfort Systems USA, Inc. 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, Inc. at the current share price and the inputted number of shares is $1.4 billion.

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