Intrinsic value of Comfort Systems USA - FIX

Previous Close

$55.00

  Intrinsic Value

$51.79

stock screener

  Rating & Target

hold

-6%

Previous close

$55.00

 
Intrinsic value

$51.79

 
Up/down potential

-6%

 
Rating

hold

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 2.0

 

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, %
  15.00
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
Revenue, $m
  2,056
  2,344
  2,651
  2,977
  3,321
  3,683
  4,063
  4,461
  4,876
  5,308
  5,759
  6,227
  6,715
  7,221
  7,747
  8,294
  8,863
  9,453
  10,068
  10,707
  11,373
  12,066
  12,788
  13,541
  14,326
  15,145
  16,000
  16,893
  17,826
  18,802
Variable operating expenses, $m
  1,924
  2,190
  2,473
  2,774
  3,091
  3,425
  3,776
  4,143
  4,525
  4,925
  5,313
  5,745
  6,194
  6,662
  7,147
  7,652
  8,176
  8,721
  9,288
  9,878
  10,492
  11,131
  11,797
  12,492
  13,216
  13,972
  14,761
  15,585
  16,445
  17,345
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
  1,924
  2,190
  2,473
  2,774
  3,091
  3,425
  3,776
  4,143
  4,525
  4,925
  5,313
  5,745
  6,194
  6,662
  7,147
  7,652
  8,176
  8,721
  9,288
  9,878
  10,492
  11,131
  11,797
  12,492
  13,216
  13,972
  14,761
  15,585
  16,445
  17,345
Operating income, $m
  132
  154
  178
  203
  230
  258
  287
  318
  350
  384
  446
  482
  520
  559
  600
  643
  687
  732
  780
  830
  881
  935
  991
  1,049
  1,110
  1,173
  1,240
  1,309
  1,381
  1,457
EBITDA, $m
  186
  212
  240
  270
  301
  334
  368
  404
  442
  481
  522
  564
  608
  654
  702
  751
  803
  857
  912
  970
  1,030
  1,093
  1,159
  1,227
  1,298
  1,372
  1,450
  1,531
  1,615
  1,704
Interest expense (income), $m
  2
  6
  13
  21
  28
  37
  46
  55
  65
  75
  86
  97
  109
  121
  134
  147
  161
  175
  189
  205
  221
  237
  255
  273
  291
  311
  331
  352
  375
  398
  422
Earnings before tax, $m
  126
  141
  157
  174
  193
  212
  232
  253
  275
  297
  349
  373
  399
  426
  453
  482
  512
  543
  575
  609
  644
  680
  718
  758
  799
  842
  887
  934
  983
  1,035
Tax expense, $m
  34
  38
  42
  47
  52
  57
  63
  68
  74
  80
  94
  101
  108
  115
  122
  130
  138
  147
  155
  164
  174
  184
  194
  205
  216
  227
  240
  252
  266
  279
Net income, $m
  92
  103
  115
  127
  141
  155
  169
  185
  201
  217
  255
  273
  291
  311
  331
  352
  374
  396
  420
  444
  470
  497
  524
  553
  583
  615
  648
  682
  718
  755

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
  1,013
  1,155
  1,307
  1,467
  1,637
  1,815
  2,002
  2,198
  2,403
  2,616
  2,838
  3,069
  3,309
  3,559
  3,818
  4,088
  4,368
  4,659
  4,962
  5,277
  5,605
  5,947
  6,303
  6,674
  7,061
  7,464
  7,886
  8,326
  8,786
  9,266
Adjusted assets (=assets-cash), $m
  1,013
  1,155
  1,307
  1,467
  1,637
  1,815
  2,002
  2,198
  2,403
  2,616
  2,838
  3,069
  3,309
  3,559
  3,818
  4,088
  4,368
  4,659
  4,962
  5,277
  5,605
  5,947
  6,303
  6,674
  7,061
  7,464
  7,886
  8,326
  8,786
  9,266
Revenue / Adjusted assets
  2.030
  2.029
  2.028
  2.029
  2.029
  2.029
  2.029
  2.030
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
  2.029
Average production assets, $m
  224
  255
  289
  324
  362
  401
  443
  486
  531
  579
  628
  679
  732
  787
  844
  904
  966
  1,030
  1,097
  1,167
  1,240
  1,315
  1,394
  1,476
  1,562
  1,651
  1,744
  1,841
  1,943
  2,049
Working capital, $m
  93
  105
  119
  134
  149
  166
  183
  201
  219
  239
  259
  280
  302
  325
  349
  373
  399
  425
  453
  482
  512
  543
  575
  609
  645
  682
  720
  760
  802
  846
Total debt, $m
  130
  205
  285
  369
  458
  552
  651
  754
  861
  973
  1,090
  1,212
  1,338
  1,469
  1,606
  1,748
  1,895
  2,048
  2,207
  2,373
  2,546
  2,725
  2,913
  3,108
  3,311
  3,524
  3,745
  3,977
  4,219
  4,472
Total liabilities, $m
  533
  608
  687
  772
  861
  955
  1,053
  1,156
  1,264
  1,376
  1,493
  1,614
  1,741
  1,872
  2,008
  2,150
  2,298
  2,451
  2,610
  2,776
  2,948
  3,128
  3,315
  3,510
  3,714
  3,926
  4,148
  4,379
  4,621
  4,874
Total equity, $m
  480
  548
  619
  695
  776
  860
  949
  1,042
  1,139
  1,240
  1,345
  1,455
  1,569
  1,687
  1,810
  1,938
  2,070
  2,208
  2,352
  2,501
  2,657
  2,819
  2,987
  3,163
  3,347
  3,538
  3,738
  3,946
  4,164
  4,392
Total liabilities and equity, $m
  1,013
  1,156
  1,306
  1,467
  1,637
  1,815
  2,002
  2,198
  2,403
  2,616
  2,838
  3,069
  3,310
  3,559
  3,818
  4,088
  4,368
  4,659
  4,962
  5,277
  5,605
  5,947
  6,302
  6,673
  7,061
  7,464
  7,886
  8,325
  8,785
  9,266
Debt-to-equity ratio
  0.270
  0.370
  0.460
  0.530
  0.590
  0.640
  0.690
  0.720
  0.760
  0.790
  0.810
  0.830
  0.850
  0.870
  0.890
  0.900
  0.920
  0.930
  0.940
  0.950
  0.960
  0.970
  0.970
  0.980
  0.990
  1.000
  1.000
  1.010
  1.010
  1.020
Adjusted equity ratio
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474
  0.474

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  92
  103
  115
  127
  141
  155
  169
  185
  201
  217
  255
  273
  291
  311
  331
  352
  374
  396
  420
  444
  470
  497
  524
  553
  583
  615
  648
  682
  718
  755
Depreciation, amort., depletion, $m
  55
  58
  62
  67
  71
  76
  81
  86
  92
  97
  76
  82
  88
  95
  102
  109
  116
  124
  132
  141
  149
  158
  168
  178
  188
  199
  210
  222
  234
  247
Funds from operations, $m
  146
  161
  177
  194
  212
  231
  250
  271
  292
  315
  330
  354
  379
  406
  433
  461
  490
  520
  552
  585
  619
  655
  692
  731
  771
  814
  858
  904
  952
  1,002
Change in working capital, $m
  12
  13
  14
  15
  15
  16
  17
  18
  19
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
Cash from operations, $m
  134
  148
  163
  179
  196
  214
  233
  253
  274
  295
  310
  333
  358
  383
  409
  436
  464
  494
  524
  556
  589
  624
  660
  697
  736
  777
  819
  864
  910
  958
Maintenance CAPEX, $m
  -23
  -27
  -31
  -35
  -39
  -44
  -48
  -53
  -59
  -64
  -70
  -76
  -82
  -88
  -95
  -102
  -109
  -116
  -124
  -132
  -141
  -149
  -158
  -168
  -178
  -188
  -199
  -210
  -222
  -234
New CAPEX, $m
  -29
  -31
  -33
  -36
  -38
  -39
  -41
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -57
  -60
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -89
  -93
  -97
  -102
  -106
Cash from investing activities, $m
  -52
  -58
  -64
  -71
  -77
  -83
  -89
  -96
  -104
  -111
  -119
  -127
  -135
  -143
  -152
  -162
  -171
  -180
  -191
  -202
  -214
  -225
  -237
  -250
  -264
  -277
  -292
  -307
  -324
  -340
Free cash flow, $m
  82
  90
  99
  109
  120
  131
  143
  156
  170
  184
  191
  207
  223
  239
  257
  275
  294
  313
  333
  354
  376
  399
  423
  447
  473
  499
  527
  556
  586
  618
Issuance/(repayment) of debt, $m
  70
  75
  80
  84
  89
  94
  98
  103
  108
  112
  117
  121
  126
  131
  136
  142
  147
  153
  159
  166
  173
  180
  187
  195
  204
  212
  222
  232
  242
  253
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  
  70
  75
  80
  84
  89
  94
  98
  103
  108
  112
  117
  121
  126
  131
  136
  142
  147
  153
  159
  166
  173
  180
  187
  195
  204
  212
  222
  232
  242
  253
Total cash flow (excl. dividends), $m
  151
  165
  179
  194
  209
  225
  242
  259
  277
  296
  308
  328
  349
  371
  393
  417
  441
  466
  493
  520
  549
  579
  610
  642
  676
  712
  749
  788
  828
  871
Retained Cash Flow (-), $m
  -62
  -67
  -72
  -76
  -80
  -85
  -89
  -93
  -97
  -101
  -105
  -109
  -114
  -118
  -123
  -128
  -133
  -138
  -144
  -149
  -155
  -162
  -169
  -176
  -183
  -191
  -200
  -209
  -218
  -228
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
  89
  97
  107
  117
  129
  141
  153
  166
  180
  195
  203
  219
  235
  252
  270
  289
  308
  328
  349
  371
  393
  417
  441
  466
  493
  520
  549
  579
  610
  643
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
  85
  89
  93
  97
  100
  102
  103
  104
  104
  102
  96
  93
  89
  85
  79
  73
  67
  60
  54
  47
  41
  35
  29
  24
  19
  15
  12
  9
  7
  5
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 (FIX)

Valuation Ratios
P/E Ratio 31.5
Price to Sales 1.3
Price to Book 5.4
Price to Tangible Book
Price to Cash Flow 22.5
Price to Free Cash Flow 30.1
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 $1787.922 million for the last fiscal year's total revenue generated by Comfort Systems USA. The default revenue input number comes from 0001 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 15% 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 93.8%.

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 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 10% 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 10.9%.

Life of production assets of 8.3 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 4.5%. 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 - $417.945 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 37.245 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 $2.0 billion.

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COMPANY NEWS

▶ Comfort Systems USA Increases Stock Repurchase Program   [Aug-10-18 04:08PM  Business Wire]
▶ Comfort Systems USA, Inc. to Host Earnings Call   [Jul-27-18 09:00AM  ACCESSWIRE]
▶ Comfort Systems USA Reports Second Quarter 2018 Results   [Jul-26-18 04:08PM  Business Wire]
▶ 5 Stocks Near 52-Week High With Scope to Perform Better   [May-14-18 01:00PM  InvestorPlace]
▶ Comfort Systems USA, Inc. to Host Earnings Call   [Apr-27-18 09:15AM  ACCESSWIRE]
▶ Comfort Systems: 1Q Earnings Snapshot   [Apr-26-18 07:12PM  Associated Press]
▶ Comfort Systems USA Extends Debt Facility   [Apr-19-18 04:10PM  Business Wire]
▶ Comfort Systems Announces New Board Member   [Apr-06-18 04:16PM  Business Wire]
▶ Comfort Systems USA, Inc. to Host Earnings Call   [Feb-23-18 08:30AM  ACCESSWIRE]
▶ Comfort Systems posts 4Q profit   [Feb-22-18 07:53PM  Associated Press]
▶ 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]

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