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One of the changes I have made recently in my portfolio selection process is to give more weight to companies with no or little debt as I believe if we get a full blown credit crisis coming from Europe or another recession, companies with strong balance sheets should outperform their more leveraged brethren. One stock I am currently looking at has a strong cash balance, low valuations and good growth prospects. It is also substantially below analysts' price targets.

"Fluor Corporation (NYSE:FLR) provides engineering, procurement, construction, maintenance, and project management services worldwide." (Business description from Yahoo Finance)

6 reasons FLR is substantially undervalued at $49 a share:

  1. The company has over $1.6B in net cash on the books, which represents approximately 20% of its market capitalization at the current stock price.
  2. The stock is selling at the bottom of its five year valuation range based on P/E, P/B, P/S and P/CF.
  3. The company has beat earnings estimates five of the last six quarters and sells for just over 11 times forward earnings, a significant discount to its five year average (18.0).
  4. Despite concerns about a possible slowdown in energy sector spending, analysts expect double digit revenue growth from Flour in FY2012 and FY2013. Consensus earnings estimates for FY2012 and FY2013 have remained stable over the past three months as well.
  5. The median analysts' price target on FLR is $74 by the 20 analysts that cover the stock, 50% above current prices. Credit Suisse has an "outperform" rating and a $75 price target on the stock.
  6. The stock has strong technical support in this price range (See Chart)

(click to enlarge)

Source: Fluor: Cash Rich Stock That Analysts Think Has 50% Upside