Ecology & Environment: Attractive Valuation, Strengthening Balance Sheet, High FCF, Return To Core Markets And A Proactive Board
John Leonard, CFA • Mon, Sep. 8
- The stock trades near the bottom of its peer group due to a steady downtrend in revenue and EBITDA as a result of a costly international expansion and lower backlog.
- The much needed management changes provide reassurance that the dual class structure has not affected the ability of the board or management to focus on maximizing shareholder value.
- The withdrawal from the Middle Eastern and Chinese markets in order to focus on the core U.S. and South American markets should reduce earnings volatility.
- The collection of unpaid receivables boosted FCF (which funds the high dividend) and strengthened the balance sheet through delevering.
- Revenue should rebound with new contract awards, which along with reduced use of contracted services and lower SG&A expenses should enable EBITDA to return to positive territory.