Federal Signal (FSS:NYS) Fundamental Valuation Report


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Federal Signal $22.22 (USD) Close Price as of 08/03/2018

Based on the analysis conducted in this report, Federal Signal, (FSS:NYS) is found to be  Undervalued.

Company Federal Signal
Symbol:Exchange FSS:NYS
Industry Industrials:Pollution & Treatment Controls
Close Price/Date $22.22 (USD) 08/03/2018
Weighted Average Valuation $25.71 (USD)
Summary FSS:NYS is found to be  Undervalued by 15.7% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $27.00 (USD)
(in order of importance) Discounted Cash Flow: $20.58 (USD)
Comparables: $32.11 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Overvalued on a Cash Flow Valuation basis
Comparable Company Basis: Undervalued on a Comparable Valuation basis
Asset Basis: Overvalued on an Asset Valuation basis

Valuation Details

Federal Signal Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for FSS:NYS

Using a discounted cash flow model we generated an intrinsic value of $20.58 (USD) for FSS:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

FSS:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $20.58 1% 5% 1% 5%
WACC (or Ke) 9.59 $24.55 $17.66
Terminal Growth Rate 3.00 $17.98 $24.12
Tax Rate 0.34 $22.55 $18.61
Cash Flow 180,037,955 $19.23 $21.93
Capital Expenditures -11,840,000 $20.49 $20.67
Long Term Debt 65,600,000 $20.63 $20.53

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $32.11 (USD) for FSS:NYS. We also generated a valuation of $33.86 (USD) using other metrics and comparables.
The comparable companies were Evoqua Water Technologies (AQUA:NYS) and Select Energy Services (WTTR:NYS)

Company FSS:NYS End Date Value
Earnings/Share $1.02 (USD)
Book Value/Share $7.62 (USD)
Sales/Share $14.88 (USD)
Cash Flow/Share $1.21 (USD)
EBITDA/Share $1.63 (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) -68.5
$58.95 (USD) -34.1
$31.40 (USD) -42.1
$51.69 (USD) -74.8
$37.92 (USD) -50.8
FSS:NYS Ratios Used Average Values AQUA:NYS WTTR:NYS
22.47 PE Ratio 223.91 223.91 0.00
2.95 PB Ratio 7.73 7.77 7.70
1.51 PS Ratio 2.11 2.13 2.09
18.64 PCF Ratio 42.88 42.88 0.00
16.16 EV to EBITDA 26.13 20.87 31.38

Multiples

Using a multiples approach we generated a valuation of  $16.83 (USD) for FSS:NYS

Company FSS:NYS End Date Value
Earnings/Share $1.02 (USD)
Book Value/Share $7.62 (USD)
Sales/Share $14.88 (USD)
Cash Flow/Share $1.21 (USD)
EBITDA/Share $1.63 (USD)
Price Based on Comps Adjustment Factor
$15.71 (USD) 0
$18.68 (USD) 0
$17.15 (USD) 0
$16.93 (USD) 0
$15.66 (USD) 0
Ratios Ratio Average
PE Ratio 15.40
PB Ratio 2.45
PS Ratio 1.15
PCF Ratio 14.05
EV to EBITDA 9.62

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  FSS:NYS for the last 10 years was  2.37

We ran the Adjusted Book Value for  FSS:NYS and generated a book value of  $7.62 (USD)
By multiplying these we get an adjusted valuation of  $18.10 (USD)

Analyst Data

In the Stockcalc database there are 1 analysts that provide a valuation for FSS:NYS. The 1 analysts have a concensus valuation for FSS:NYS for 2018 of $27.00 (USD).

FSS:NYS Federal Signal

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 0 0 5.0000 Buy 2018-3-7

Current Price: not available

Analyst Consensus
USD Millions 2018 2019
Mean EPS 1.17 1.41
# EPS Analysts 2 2
Mean Revenue 1,053.60 1,129.00
# Revenue Analysts 2 2
Mean Target Price 27.00
Mean Cash Flow 1.77
Mean EBITDA 142.30 158.90
Mean Net Income 70.70 85.50
Mean Debt Outstanding 166.00 47.00
Mean Tax Rate 26.50 26.50
Mean Growth Rate
Mean Capital Expenditure 15.80 15.20

Company Overview (FSS:NYS USD)

Price 22.22
Range 22.22 – 22.83
52 week 13.15 – 23.06
Open 22.57
Vol / Avg. 335962/149414
Mkt cap 1.33B
P/E 22.47
Div/yield 0.28/0.01
EPS 1.02
Shares 60M
Beta 1.44
Summary chart

Detailed Company Description

Federal Signal Corp designs and manufactures a suite of products and integrated solutions for municipality, industrial and others. The company operates in two segments namely Environmental Solutions Group and Safety and Security Systems Group.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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