Intrinsic value of Fluor Corporation - FLR

Previous Close

$19.34

  Intrinsic Value

$32.72

stock screener

  Rating & Target

str. buy

+69%

Previous close

$19.34

 
Intrinsic value

$32.72

 
Up/down potential

+69%

 
Rating

str. buy

We calculate the intrinsic value of FLR 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 2.7

 

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
  19,550
  20,000
  20,514
  21,091
  21,730
  22,432
  23,196
  24,023
  24,914
  25,870
  26,893
  27,984
  29,146
  30,382
  31,692
  33,081
  34,551
  36,106
  37,749
  39,483
  41,313
  43,243
  45,278
  47,421
  49,679
  52,056
  54,557
  57,190
  59,960
  62,873
Variable operating expenses, $m
  19,119
  19,558
  20,059
  20,622
  21,245
  21,929
  22,674
  23,481
  24,350
  25,282
  26,226
  27,291
  28,424
  29,629
  30,907
  32,261
  33,695
  35,211
  36,813
  38,504
  40,289
  42,171
  44,155
  46,246
  48,447
  50,765
  53,205
  55,773
  58,474
  61,315
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
  19,119
  19,558
  20,059
  20,622
  21,245
  21,929
  22,674
  23,481
  24,350
  25,282
  26,226
  27,291
  28,424
  29,629
  30,907
  32,261
  33,695
  35,211
  36,813
  38,504
  40,289
  42,171
  44,155
  46,246
  48,447
  50,765
  53,205
  55,773
  58,474
  61,315
Operating income, $m
  431
  442
  455
  469
  485
  503
  522
  542
  564
  588
  667
  694
  722
  753
  786
  820
  856
  895
  936
  979
  1,024
  1,072
  1,122
  1,175
  1,231
  1,290
  1,352
  1,418
  1,486
  1,558
EBITDA, $m
  667
  682
  700
  719
  741
  765
  791
  819
  850
  882
  917
  955
  994
  1,036
  1,081
  1,128
  1,179
  1,232
  1,288
  1,347
  1,409
  1,475
  1,544
  1,618
  1,695
  1,776
  1,861
  1,951
  2,045
  2,145
Interest expense (income), $m
  72
  91
  98
  105
  114
  124
  134
  146
  159
  173
  188
  204
  221
  239
  259
  280
  302
  325
  350
  376
  403
  432
  463
  495
  530
  565
  603
  643
  685
  729
  776
Earnings before tax, $m
  340
  344
  350
  355
  362
  368
  375
  383
  391
  400
  463
  473
  483
  494
  506
  518
  532
  545
  560
  575
  592
  609
  627
  646
  666
  687
  709
  732
  757
  783
Tax expense, $m
  92
  93
  94
  96
  98
  99
  101
  103
  106
  108
  125
  128
  130
  133
  137
  140
  144
  147
  151
  155
  160
  164
  169
  174
  180
  185
  191
  198
  204
  211
Net income, $m
  248
  251
  255
  259
  264
  269
  274
  280
  286
  292
  338
  345
  353
  361
  369
  378
  388
  398
  409
  420
  432
  444
  458
  471
  486
  501
  518
  535
  552
  571

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
  9,093
  9,302
  9,541
  9,810
  10,107
  10,434
  10,789
  11,173
  11,588
  12,033
  12,508
  13,016
  13,557
  14,131
  14,741
  15,387
  16,070
  16,793
  17,557
  18,364
  19,215
  20,113
  21,059
  22,056
  23,106
  24,212
  25,376
  26,600
  27,888
  29,243
Adjusted assets (=assets-cash), $m
  9,093
  9,302
  9,541
  9,810
  10,107
  10,434
  10,789
  11,173
  11,588
  12,033
  12,508
  13,016
  13,557
  14,131
  14,741
  15,387
  16,070
  16,793
  17,557
  18,364
  19,215
  20,113
  21,059
  22,056
  23,106
  24,212
  25,376
  26,600
  27,888
  29,243
Revenue / Adjusted assets
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
  2.150
Average production assets, $m
  1,349
  1,380
  1,415
  1,455
  1,499
  1,548
  1,601
  1,658
  1,719
  1,785
  1,856
  1,931
  2,011
  2,096
  2,187
  2,283
  2,384
  2,491
  2,605
  2,724
  2,851
  2,984
  3,124
  3,272
  3,428
  3,592
  3,764
  3,946
  4,137
  4,338
Working capital, $m
  -59
  -60
  -62
  -63
  -65
  -67
  -70
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -95
  -99
  -104
  -108
  -113
  -118
  -124
  -130
  -136
  -142
  -149
  -156
  -164
  -172
  -180
  -189
Total debt, $m
  1,812
  1,952
  2,112
  2,291
  2,490
  2,708
  2,945
  3,202
  3,479
  3,776
  4,094
  4,433
  4,794
  5,177
  5,585
  6,016
  6,473
  6,956
  7,466
  8,005
  8,574
  9,174
  9,806
  10,472
  11,173
  11,912
  12,689
  13,507
  14,367
  15,273
Total liabilities, $m
  6,074
  6,214
  6,374
  6,553
  6,752
  6,970
  7,207
  7,464
  7,741
  8,038
  8,356
  8,695
  9,056
  9,439
  9,847
  10,278
  10,735
  11,218
  11,728
  12,267
  12,836
  13,436
  14,068
  14,734
  15,435
  16,174
  16,951
  17,769
  18,629
  19,535
Total equity, $m
  3,019
  3,088
  3,168
  3,257
  3,356
  3,464
  3,582
  3,710
  3,847
  3,995
  4,153
  4,321
  4,501
  4,691
  4,894
  5,108
  5,335
  5,575
  5,829
  6,097
  6,380
  6,678
  6,992
  7,323
  7,671
  8,038
  8,425
  8,831
  9,259
  9,709
Total liabilities and equity, $m
  9,093
  9,302
  9,542
  9,810
  10,108
  10,434
  10,789
  11,174
  11,588
  12,033
  12,509
  13,016
  13,557
  14,130
  14,741
  15,386
  16,070
  16,793
  17,557
  18,364
  19,216
  20,114
  21,060
  22,057
  23,106
  24,212
  25,376
  26,600
  27,888
  29,244
Debt-to-equity ratio
  0.600
  0.630
  0.670
  0.700
  0.740
  0.780
  0.820
  0.860
  0.900
  0.950
  0.990
  1.030
  1.070
  1.100
  1.140
  1.180
  1.210
  1.250
  1.280
  1.310
  1.340
  1.370
  1.400
  1.430
  1.460
  1.480
  1.510
  1.530
  1.550
  1.570
Adjusted equity ratio
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332
  0.332

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  248
  251
  255
  259
  264
  269
  274
  280
  286
  292
  338
  345
  353
  361
  369
  378
  388
  398
  409
  420
  432
  444
  458
  471
  486
  501
  518
  535
  552
  571
Depreciation, amort., depletion, $m
  236
  240
  245
  250
  256
  263
  270
  277
  286
  295
  251
  261
  272
  283
  296
  308
  322
  337
  352
  368
  385
  403
  422
  442
  463
  485
  509
  533
  559
  586
Funds from operations, $m
  484
  491
  500
  509
  520
  531
  544
  557
  571
  587
  589
  606
  624
  644
  665
  687
  710
  735
  761
  788
  817
  848
  880
  914
  949
  987
  1,026
  1,068
  1,112
  1,158
Change in working capital, $m
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -8
  -8
  -8
  -9
Cash from operations, $m
  485
  493
  501
  511
  522
  533
  546
  559
  574
  589
  592
  609
  628
  648
  669
  691
  715
  739
  766
  793
  823
  853
  886
  920
  956
  994
  1,034
  1,076
  1,120
  1,166
Maintenance CAPEX, $m
  -179
  -182
  -186
  -191
  -197
  -203
  -209
  -216
  -224
  -232
  -241
  -251
  -261
  -272
  -283
  -296
  -308
  -322
  -337
  -352
  -368
  -385
  -403
  -422
  -442
  -463
  -485
  -509
  -533
  -559
New CAPEX, $m
  -21
  -31
  -35
  -40
  -44
  -48
  -53
  -57
  -61
  -66
  -71
  -75
  -80
  -85
  -90
  -96
  -101
  -107
  -113
  -120
  -126
  -133
  -140
  -148
  -156
  -164
  -173
  -182
  -191
  -201
Cash from investing activities, $m
  -200
  -213
  -221
  -231
  -241
  -251
  -262
  -273
  -285
  -298
  -312
  -326
  -341
  -357
  -373
  -392
  -409
  -429
  -450
  -472
  -494
  -518
  -543
  -570
  -598
  -627
  -658
  -691
  -724
  -760
Free cash flow, $m
  285
  279
  280
  280
  281
  282
  284
  286
  288
  291
  280
  283
  287
  291
  295
  300
  305
  310
  316
  322
  328
  335
  342
  350
  358
  367
  376
  385
  395
  406
Issuance/(repayment) of debt, $m
  124
  140
  160
  179
  199
  218
  237
  257
  277
  297
  318
  339
  361
  384
  407
  432
  457
  483
  510
  539
  569
  600
  632
  666
  701
  739
  777
  818
  861
  905
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  
  124
  140
  160
  179
  199
  218
  237
  257
  277
  297
  318
  339
  361
  384
  407
  432
  457
  483
  510
  539
  569
  600
  632
  666
  701
  739
  777
  818
  861
  905
Total cash flow (excl. dividends), $m
  409
  419
  439
  459
  480
  500
  521
  543
  565
  588
  598
  622
  648
  674
  702
  731
  761
  793
  826
  861
  897
  935
  974
  1,016
  1,060
  1,105
  1,153
  1,203
  1,256
  1,311
Retained Cash Flow (-), $m
  -56
  -69
  -79
  -89
  -99
  -108
  -118
  -128
  -138
  -148
  -158
  -169
  -179
  -191
  -202
  -214
  -227
  -240
  -254
  -268
  -283
  -298
  -314
  -331
  -349
  -367
  -386
  -407
  -428
  -450
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
  353
  350
  360
  370
  381
  392
  403
  415
  428
  441
  440
  454
  468
  484
  500
  517
  534
  553
  572
  593
  614
  637
  660
  685
  711
  738
  767
  797
  828
  861
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
  338
  320
  313
  305
  295
  285
  273
  260
  246
  231
  209
  194
  178
  162
  147
  131
  116
  102
  88
  75
  64
  53
  43
  35
  28
  22
  16
  12
  9
  6
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

Fluor Corporation (Fluor) is a holding company. The Company operates its business in four segments: Energy, Chemicals & Mining; Industrial, Infrastructure & Power; Government, and Maintenance, Modification & Asset Integrity (MMAI). The Company, through its subsidiaries, offers professional services providing engineering, procurement, construction, fabrication and modularization, commissioning and maintenance, as well as project management services on a global basis. The Company is an integrated solutions provider for various industries, including oil and gas, chemicals and petrochemicals, mining and metals, transportation, power, life sciences and advanced manufacturing. It is also a service provider to the United States federal Government and governments abroad. It offers services in various categories, including engineering and design, procurement, construction, fabrication, maintenance, modification and asset integrity and project management.

FINANCIAL RATIOS  of  Fluor Corporation (FLR)

Valuation Ratios
P/E Ratio 9.6
Price to Sales 0.1
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 3.8
Price to Free Cash Flow 5.7
Growth Rates
Sales Growth Rate 5.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -1.7%
Cap. Spend. - 3 Yr. Gr. Rate -3.9%
Financial Strength
Quick Ratio 24
Current Ratio 0.1
LT Debt to Equity 48.6%
Total Debt to Equity 51.2%
Interest Coverage 9
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 5.3%
Return On Total Capital 6.5%
Ret/ On T. Cap. - 3 Yr. Avg. 9.6%
Return On Equity 9.2%
Return On Equity - 3 Yr. Avg. 12.5%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 4.1%
Gross Margin - 3 Yr. Avg. 5.6%
EBITDA Margin 4.4%
EBITDA Margin - 3 Yr. Avg. 5.4%
Operating Margin 2.9%
Oper. Margin - 3 Yr. Avg. 4.2%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 4.2%
Net Profit Margin 1.5%
Net Profit Margin - 3 Yr. Avg. 2%
Effective Tax Rate 40.2%
Eff/ Tax Rate - 3 Yr. Avg. 34.5%
Payout Ratio 42%

FLR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FLR stock intrinsic value calculation we used $19167 million for the last fiscal year's total revenue generated by Fluor Corporation. The default revenue input number comes from 0001 income statement of Fluor Corporation. 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 FLR 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 4.3%, whose default value for FLR is calculated based on our internal credit rating of Fluor Corporation, 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 Fluor Corporation.
    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 FLR stock the variable cost ratio is equal to 97.8%.

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 FLR 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 Fluor Corporation.

Corporate tax rate of 27% is the nominal tax rate for Fluor Corporation. 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 FLR 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 FLR are equal to 6.9%.

Life of production assets of 7.4 years is the average useful life of capital assets used in Fluor Corporation 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 FLR is equal to -0.3%. 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 - $2963.181 million for Fluor Corporation - 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 139.640 million for Fluor Corporation 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 Fluor Corporation at the current share price and the inputted number of shares is $2.7 billion.

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