ACM
Aecom
$68.17
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 31.3% above fair value
You pay
$68.17
Bear
$38.07
Fair
$51.92
Bull
$65.76
Bear
$38.07
-44.1%
$2.18 × 14x + net cash
Fair
$51.92
-23.8%
$2.18 × 18x + net cash
Bull
$65.76
-3.5%
$2.18 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.18)
Implied Market Multiple
31.3x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $109.57 from 25 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $51.92 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Recent profits ($4.21/share) are 93% above the mid-cycle average ($2.18). Buying based on peak profits is the most common mistake with boom-and-bust businesses.
Wall Street's average price target is $109.57 (from 25 analysts). Our estimate is 70% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing