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FMC Technologies Inc. Valuation – November 2015 Update $FTI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how FMC Technologies Inc. (FTI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): FMC Technologies, Inc. is a provider of technology solutions for the energy industry. The Company’s segments include Subsea Technologies, Surface Technologies and Energy Infrastructure. Subsea Technologies designs and manufactures products and systems and provides services used by oil and gas companies involved in deepwater exploration and production of crude oil and natural gas. Surface Technologies designs and manufactures systems and provides services used by oil and gas companies involved in land and offshore exploration and production of crude oil and gas; designs, manufactures and supplies high pressure valves and fittings for oilfield service companies, and also provides flowback and wireline services for exploration companies. Energy Infrastructure manufactures and supplies liquid and gas measurement and transportation equipment and systems for the production, transportation and processing of crude oil, natural gas and petroleum-based refined products and the mining industry.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of FTI – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,865,562,513 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.77 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 96.29% Pass
6. Moderate PEmg Ratio PEmg < 20 15.54 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.10 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.77 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.69 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

FTI value Chart November 2015

EPSmg $2.16
MG Growth Estimate 6.59%
MG Value $46.88
Opinion Undervalued
MG Value based on 3% Growth $31.37
MG Value based on 0% Growth $18.39
Market Implied Growth Rate 3.52%
Current Price $33.62
% of Intrinsic Value 71.71%

FMC Technologies Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio and lack of dividends.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.50 in 2011 to an estimated $2.16 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.52% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on FMC Technologies Inc. (FTI)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

FTI Charts November 2015

Net Current Asset Value (NCAV) -$0.04
Graham Number $21.26
PEmg 15.54
Current Ratio 1.77
PB Ratio 3.10
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

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Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $4,195,600,000
Total Current Liabilities $2,371,400,000
Long-Term Debt $1,261,200,000
Total Assets $6,711,200,000
Intangible Assets $773,200,000
Total Liabilities $4,205,700,000
Shares Outstanding (Diluted Average) 231,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.83
Dec14 $2.95
Dec13 $2.10
Dec12 $1.78
Dec11 $1.64
Dec10 $1.53
Dec09 $1.44
Dec08 $1.39
Dec07 $1.13
Dec06 $0.99
Dec05 $0.38
Dec04 $0.42
Dec03 $0.26
Dec02 -$0.51
Dec01 $0.13
Dec00 $0.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.16
Dec14 $2.22
Dec13 $1.80
Dec12 $1.62
Dec11 $1.50
Dec10 $1.39
Dec09 $1.23
Dec08 $1.04
Dec07 $0.79
Dec06 $0.51
Dec05 $0.23
Dec04 $0.14
Dec03 $0.01
Dec02 -$0.09
Dec01 $0.11
Dec00 $0.08

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Oil & Gas Industry – August 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
FMC Technologies Inc. Analysis – August 2015 Update $FTI
47 Companies in the Spotlight This Week – 5/16/15
FMC Technologies Inc. Quarterly Valuation – May 2015 $FTI

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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