ACM
Aecom
$72.04
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 38.1% above fair value
You pay
$72.04
Bear
$38.26
Fair
$52.17
Bull
$66.08
Bear
$38.26
-46.9%
$2.18 × 14x + net cash
Fair
$52.17
-27.6%
$2.18 × 18x + net cash
Bull
$66.08
-8.3%
$2.18 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($2.18)
Implied Market Multiple
33.0x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $110.57 from 25 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $52.17 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 $110.57 (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