Oil & Gas Stocks

FMC Technologies Inc Valuation – March 2016 $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 Companies Benjamin Graham Would Invest In Today – February 2016.  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.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of FTI

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 $6,235,415,412 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.69 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 44.19% Pass
6. Moderate PEmg Ratio PEmg < 20 15.34 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.54 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 1.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.71 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 March 2016

EPSmg $1.80
MG Growth Estimate 1.61%
MG Value $21.04
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $26.03
MG Value based on 0% Growth $15.26
Market Implied Growth Rate 3.42%
Current Price $27.54
% of Intrinsic Value 130.89%

FMC Technologies, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, and the poor dividend history. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.62 in 2012 to an estimated $1.80 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.42% 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 below the price.

FMC Technologies, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

FTI charts March 2016

Net Current Asset Value (NCAV) $0.10
Graham Number $16.25
PEmg 15.34
Current Ratio 1.69
PB Ratio 2.54
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Total Current Assets $3,948,700,000
Total Current Liabilities $2,343,300,000
Long-Term Debt $1,134,100,000
Total Assets $6,437,900,000
Intangible Assets $761,000,000
Total Liabilities $3,926,100,000
Shares Outstanding (Diluted Average) 231,700,000

Earnings Per Share History

Next Fiscal Year Estimate $1.06
Dec2015 $1.70
Dec2014 $2.95
Dec2013 $2.10
Dec2012 $1.78
Dec2011 $1.64
Dec2010 $1.53
Dec2009 $1.44
Dec2008 $1.39
Dec2007 $1.13
Dec2006 $0.99
Dec2005 $0.38
Dec2004 $0.42
Dec2003 $0.26
Dec2002 -$0.51
Dec2001 $0.13
Dec2000 $0.23

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.80
Dec2015 $2.12
Dec2014 $2.22
Dec2013 $1.80
Dec2012 $1.62
Dec2011 $1.50
Dec2010 $1.39
Dec2009 $1.23
Dec2008 $1.04
Dec2007 $0.79
Dec2006 $0.51
Dec2005 $0.23
Dec2004 $0.14
Dec2003 $0.01
Dec2002 -$0.09
Dec2001 $0.11
Dec2000 $0.08

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – February 2016
FMC Technologies Inc. Valuation – November 2015 Update $FTI
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

Other ModernGraham posts about related companies

Valero Energy Corp Valuation – February 2016 $VLO
Schlumberger Ltd Valuation – February 2016 $SLB
National Oilwell Varco Inc Valuation – February 2016 Update $NOV
Southwestern Energy Company Valuation – February 2016 Update $SWN
Apache Corporation Valuation – January 2016 Update $APA
Anadarko Petroleum Corp Valuation – January 2016 Update $APC
Cabot Oil & Gas Corp Valuation – December 2015 Update $COG
Helmerich & Payne Inc Valuation – November 2015 Update $HP
Murphy Oil Corporation Valuation – November 2015 Update $MUR
Denbury Resources Inc. Valuation – November 2015 Update $DNR

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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top