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Market Shadows: Group of writers and investors: Paul Price, Lee Adler, and Ilene.
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  • ABM Industries (ABM) – Providing Mundane, Necessary Services 0 comments
    Nov 22, 2012 3:57 PM | about stocks: ABM
    ABM Industries (NYSE:ABM) - Providing Mundane, Necessary Services

    Courtesy of Dr. Paul Price of Market Shadows

    The name ABM Industries used to stand for American Building Maintenance. That better described the janitorial, security, parking, engineering and other assorted facilities services the firm provides to private, institutional and government entities. About 95% of its greater than $4 billion in annual revenues come from within the US. The remainder comes from Canada.

    ABM serves office buildings, hospitals, large sports/entertainment arenas, universities and many levels of government facilities.

    There is bad news and good news. Fiscal year (FY) 2012 (ended Oct. 31, 2012) is likely to have come in at about $1.29 versus FY 2011's $1.39. The good news is that ABM shares have more than reflected the 7.2% dip in EPS, and the dividend has been raised slightly.

    The consensus views are for $1.39 in EPS for the current FY. With ABM at just $18.28, the stock is offered at less than 13.2x FY 2013 expectations. Its 10-year median multiple has been 19x. ABM's average P/E was 16x during the five recession-tainted years of 2008 - 2012.

    (click to enlarge)

    Today's current yield of 3.17% is the best since the absolute bottom in 2009. The forward multiple is near the levels it hit at the last three best trading opportunities.

    Risk appears limited. ABM hasn't traded below $17.32 since 2009. It has topped out at $23.29 to $27.50 at some point during each of the past seven calendar years. The company's beta is below average, and it has earned good grades from Value Line for financial strength, stock price stability and especially in terms of earnings predictability (5 is worst, 100 is best).

    Even a partial rebound could send ABM up by $4 - $5 per share allowing for a 24% - 30% total return. Value Line assumes a normalized P/E of 18 in calculating its longer-term price projections.

    I'm a buyer anywhere under $19 with a minimum trading target of $22. You might not get filthy rich, but you could clean up with this somewhat conservative pick. I added to my own ABM position today at $18.28 - 18.30.

    Disclosure: Long ABM shares

    ******

    Paul's Value Virtual Portfolio includes shares of ABM. Here is a screenshot of the most recent update of the portfolio.

    (click to enlarge)

    Notes:

    Paul began this virtual portfolio on 10/26, buying approximately $3,000 of the stocks listed in the left-hand column.

    Paul added to his ESRX position on 11/7, taking this position to 5%. (Rule: positions should not exceed 5% of a portfolio.)

    Virtual profits taken on the ANF position on 11/15 at $41.80.

    TAP added on 11/19 at $40.15.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: long positions Stocks: ABM
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