Fluor Corp (FLR) is back in focus after USA Rare Earth selected the company, alongside WSP Global, as an EPCM partner for the Round Top rare earth project in Texas.
See our latest analysis for Fluor.
The Round Top EPCM win comes as Fluor’s share price has gained 1.7% over the last day and 15.8% over the past month, while the 1 year total shareholder return is slightly negative and the 5 year total shareholder return remains strongly positive. This suggests that recent momentum has picked up after earlier weakness.
If this rare earths contract has you thinking about other industrial names tied to long term projects, it could be a good moment to widen your search with aerospace and defense stocks.
With the shares up over the past month, trading around $46.78 and only about 8% below the average analyst price target of $50.50, the key question is whether Fluor still offers upside or if the market is already pricing in future growth.
Most Popular Narrative: 8.3% Undervalued
Fluor’s most followed narrative points to a fair value of $51.00 compared with the last close at $46.78, placing the current move after the Round Top win within a broader earnings and cash flow context.
The company's new strategy focusing on cash generation and earnings growth is likely to improve net margins and enhance earnings. Expansion into strategic markets, coupled with project completions and acquisitions, is expected to increase revenue and enhance shareholder value.
Curious what kind of revenue path and margin reset underpin that $51.00 figure? The narrative refers to specific growth targets, a shrinking share count, and a future earnings multiple that differs from today. If you want to see how those moving parts are modeled over the next few years, the full story is worth a close read.
Result: Fair Value of $51.00 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, project delays and foreign exchange swings could pressure margins and cash flow, which would quickly challenge the earnings and valuation path behind that $51.00 figure.
Find out about the key risks to this Fluor narrative.
Another View: Cash Flows Paint A Tougher Picture
While the popular narrative points to a fair value of $51.00, our DCF model points the other way, with an estimate of $37.66 and suggests the shares are trading above future cash flow value. That tension raises a simple question: which story do you trust more, earnings or cash flows?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Fluor for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 868 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Build Your Own Fluor Narrative
If you look at the numbers and come to a different conclusion, or simply prefer your own homework, you can build a narrative in minutes with Do it your way.
A great starting point for your Fluor research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.
Ready for more investment ideas?
If you stop with Fluor, you might miss other opportunities that fit your style, so use the screeners below to quickly spot ideas worth a closer look.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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