Pholesolus

FLR Is A 6 Bagger! 600% Potential Return For Patient Traders

Long
NYSE:FLR   FLUOR CORP
MY BEST WRITE UP YET -> Hey guys! I've decided to pitch something I've never put out before - a longer term hedge-fund-style value hold that's a simple and easy 6 bagger from these prices. Here's the deal:

FLR is a MASSIVE EPC company that's in charge of building the infrastructure of the future. As an Engineering, Procurement and Construction firm that operates in multiple sectors, they command a large market share within a huge market. FLR builds anything and everything, from pit mines and nuclear reactors to bio labs and data centers. If you need something complex and expensive built, you will probably solicit a bid from FLR . With that expertise and breadth of offering, FLR has a huge backlog of projects worth billions of dollars in revenue, along with excellent relationships with firms that need things built - industrial companies, utilities, energy firms, etc. Why has the stock gotten crushed over the last two years, then? What's not to like?

Well, as it turns out, two things. First, risk management. FLR , under it's former leadership (since replaced), was responsible for taking on projects in which they were aggressive and didn't do a good job in calculating their costs. This led to projects taking longer and costing more than expected, which in turn led to some huge write-downs that cost the firm hundreds of millions of dollars in profits. Secondly, COVID has brought the world to a standstill, and with it, corporate CAPEX spending. That's a problem, considering CAPEX is the part of the value chain FLR's revenue comes from. These are both big problems that will likely lead to further damage in future financial results. There was an additional DoJ / SEC investigation into the aforementioned risky bidding process and FLR's business practices, which was also a large negative catalyst.

However, there are a few reasons that the stock is primed to massively outperform.

1.) COVID is temporary
2.) The poor management team was kicked out and replaced with the original team that led the company to glory in the decades preceding 2018
3.) Every negative catalyst is baked into this price, including the delays in financial filing
4.) FLR continues to do business with the United States government, signaling confidence in the firm's long term stability and financial position
5.) A positive catalyst finally came, in the form of an approval (From the U.S. Navy) for a miniaturized nuclear reactor to be used in NuScale's experimental power project in Utah

This combination of factors makes me think that this company has bottomed in terms of sentiment. Once all of the garbage and baggage related to the previous management is cleared up, There's no reason that this stock won't / shouldn't trade at the pre-problem levels, in the 50's and 60's. As of last reporting, FLR makes $120 in revenue per share. Given that the stock is trading right now at sub $10, I think it's a great time to buy from a valuation perspective. You could be buying this company, which again, operationally, is (should be) back to where it was in the mid 2010's, for 5 times earnings . That's an investment that theoretically pays itself off in 5 years, which is an excellent price, especially relative to other companies' valuations right now.

The stock won't make huge moves, but over time this has a high probability of becoming a great compounder for any portfolio.

Additionally, you get paid almost 5% in annual dividends while you wait, so to speak.

The Risk / Reward is attractive, sentiment has bottomed, and it's time to smash the buy button on FLR .

Comments

Fair analysis. Fluor are pretty much the same as Jacobs and both have been around ages. Fluor is trading at a massive discount compared to Jacobs so provided they have put the bad projects behind them I don't see why they wouldn't catch up with Jacobs again. Project lifecycles are anywhere from 2 to 5 years typically (although can go longer) so provided they are still landing projects they should be fine.
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This has been a great hold so far. See ya in a few years!
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Pholesolus DXY_to_0
@DXY_to_0, ur welcome ;)
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Excellent knowledge of the company, excellent analysis, COVID will not last forever, turn off your TV Politics will drive you crazy!
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Pholesolus mthompson45
@mthompson45, thanks!
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I dunno, looks bearish to me at least in the short future.. can be interesting after November
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Pholesolus Ankel-ssj
@Ankel-ssj, perhaps
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Thanks for this however the crystal ball corporate media have already told the public that “covid may last FOREVER”
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Pholesolus dRends35
@dRends35, Covid won't last forever, that's clear.
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dRends35 Pholesolus
@Pholesolus, How is it clear?
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