A Hyperloop Investment You Can Make Right Now

| About: AECOM Technology (ACM)

Summary

There is a fairly risk-proof way that you can invest in Elon Musk’s Hyperloop high-speed transportation system right now.

You can buy stock in AECOM.

AECOM was hired by Musk himself to build the Hyperloop test track.

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There is a fairly risk-proof way that you can invest in Elon Musk’s Hyperloop high-speed transportation system right now. You can buy stock in AECOM (NYSE:ACM) - the American engineering, construction, consulting, construction management and design firm.

AECOM was hired by Musk himself to build the Hyperloop test track at his SpaceX (Private:SPACE) rocket company in Hawthorne, California, The Verge reported. That track will be used to test the winning pods from Musk’s Hyperloop pod design contest.

To add icing to the cake, news reports indicate that AECOM will build the test track for Hyperloop One at the Apex Industrial Park in North Las Vegas, Nevada. Hyperloop One, the company formerly known as Hyperloop Technologies, is the privately held startup, created by venture capitalist Shervin Pishevar. It is also the company that tested the Hyperloop propulsion system in North Las Vegas on May 11, 2016.

AECOM is listed as one of Hyperloop One’s partners at the company’s website. AECOM, Hyperloop One, KMPG and a startup called GRID Logistics are involved in Arcturan Sustainable Cargo. Arcturan is a consortium that is conducting a feasibility study on the use of advancing technologies to move cargo around the congested ports of Los Angeles, San Pedro and Long Beach. If it is successful Arcturan could provide a solution for cargo movement around the globe.

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AECOM is also participating in Hyperloop One’s Global Challenge to find a location for route for the first operating transportation system. The Challenge could provide new customers for AECOM and enhance its reputation as a provider of next generation-transportation solutions.

If that was not enough, AECOM was previously involved with Hyperloop One’s crowdfunded competitor, Hyperloop Transportation Technologies or HTT. Some news reports indicated that AECOM was involved in HTT’s plans to build its own Hyperloop Test track in Quay Valley in California’s Central Valley. The Verge recently reported that those plans have been called off.

Fortune 500 Company Involved in Hyperloop

AECOM is not a startup, it is a Fortune 500 company that trades on the New York Stock Exchange, under the ticker symbol: ACM. It also trades on the Frankfurt Stock Exchange under the symbol E6Z.

The company is also highly respected. In 2015, the trade journal Engineering News Record named AECOM as number one on its list of the world’s Top 500 design firms for 2015. It has also appeared on Fortune’s list of Most Admired Companies.

AECOM is actually an acronym, which stands for Architecture, Engineering, Consulting Operations and Maintenance. The company started as part of Ashland Corporation, a subsidiary of Ashland Oil, which acquired Daniel, Mann, Johnson & Mendenall or DMJM, an engineering firm 1984. AECOM was spun off from Ashland in 1990 and adopted a new name.

The company went public as AECOM Technology Corporation in 2007 and changed its name to just AECOM in 2015. It currently has around 95,000 employees all over the world.

Crossrail tunnel under London. Crossrail tunnel under London.

Major infrastructure projects that AECOM has been involved in include Brooklyn’s Barclay’s Center home of the New York Nets and the New York Islanders, the Crossrail underground rail project in London and the Alameda Corridor Freight rail line in Los Angeles. Over the years, AECOM has also built hospitals, bridges, transit systems, offshore terminals and even schools.

Is AECOM a Good Investment?

Okay so AECOM is a real company, and it is heavily involved in Hyperloop, but is it a good investment? The answer is yes if you’re looking for a long-term Hyperloop investment because it is cheap right now. AECOM was trading at $32.80 a share on May 12, 2016.

AECOM is growing. It reported revenues of $17.95 billion for the first quarter of 2015, on March 31. Those revenues did grow by $4.7 billion over the past year, rising from $13.25 billion in March 2015 to $17.95 billion in 2016, data from YCharts indicates. The revenues show us that the company’s business is expanding at an impressive rate but it is not making that much money.

AECOM reported a net income of just $5.32 million on March 31, 2016. That was far better than the -$5.44 million loss the company reported in March 2015, but it is hardly impressive.

Does AECOM Make Money?

Some of the other numbers it turned in for first quarter 2016 were not very good either. For example, AECOM reported a diluted earnings per share (EPS) number of .0369, a return on equity of .16%, no dividend yield and a free cash flow of just $77.12 million.

Click to enlargeConcept art of Hyperloop One’s freight pod.

AECOM does have a lot of float though. It reported $13.99 billion in cash and short-term investments for the first quarter. That figure alone, should be of interest to value investors. That makes AECOM a very safe investment, although not one that will generate any big returns anytime soon.

The financial numbers also show us that AECOM makes money. It generated $559.85 million in cash from operations and $13.62 million in cash from investing during the first quarter 2016. That means the company has plenty of float, which is the term Warren Buffett uses to describe extra cash a company can use for investments, financing, acquisitions and expansion.

A Good Way to Invest in Hyperloop

AECOM would be the best way for average people to invest in the Hyperloop. It is a good solid company that makes a lot of money, even if the returns are not that great.

More importantly, the stock is cheap. AECOM had a market capitalization of $4.981 billion and an enterprise value of $8.783 billion on May 12, 2016. That means there’s a lot of room for growth in the stock’s value.

It could also be a real opportunity if Hyperloop ever takes off as a transportation system. Since AECOM, would presumably be the company that builds the Hyperloop infrastructure, it will be the first to make money.

What this means is that there is a safe way for average people to invest in Hyperloop - they can buy AECOM stock. This investment is far safer than investing in HTT’s crowd funding and you will not have to wait until Hyperloop One goes public to buy it. If Hyperloop is the future, AECOM could be the first company to profit from it.