- If you are wondering whether AECOM’s current share price really reflects what you are getting for your money, this article breaks down the key numbers so you can judge the value for yourself.
- The stock most recently closed at US$90.32, with returns of 0.6% over 7 days, a 1.0% decline over 30 days, a 6.3% decline year to date, and a 3.9% decline over the last year.
- Over a longer horizon, AECOM has delivered total returns of 15.0% over 3 years and 49.3% over 5 years, which gives important context to the more recent pullback. These figures can influence how investors think about both the growth potential and the risks that may already be reflected in the price.
- AECOM currently has a valuation score of 6 out of 6. The rest of this article will unpack what different valuation approaches say about that score and point you toward an even more complete way to think about value at the end.
Find out why AECOM's -3.9% return over the last year is lagging behind its peers.
Approach 1: AECOM Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a business might be worth by projecting future cash flows and discounting them back to today’s value using a required rate of return.
For AECOM, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is about $620.8 million. Analysts provide estimates out to 2027, with free cash flow for the year to 30 September 2027 projected at $884.5 million. Beyond that, Simply Wall St extrapolates cash flows, reaching a projected free cash flow of about $1,215.6 million in 2035, with each future year discounted back to a present value.
Adding these discounted cash flows together gives an estimated intrinsic value of about $117.36 per share. Compared with the recent share price of $90.32, the model implies AECOM trades at roughly a 23.0% discount to this intrinsic value, which indicates the shares appear undervalued on this DCF view.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests AECOM is undervalued by 23.0%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.
Approach 2: AECOM Price vs Earnings
For a profitable company like AECOM, the P/E ratio is a useful shorthand for how much you are paying for each dollar of current earnings. It is influenced by what the market expects for future earnings growth and how risky those earnings are perceived to be, which helps shape what might be considered a normal or fair P/E level.
AECOM currently trades on a P/E of 19.4x. This sits below the Construction industry average of about 32.1x and also below the peer average of 33.3x, which suggests the market is applying a lower earnings multiple to AECOM than to many of its listed peers.
Simply Wall St’s Fair Ratio for AECOM is 28.4x, which is its proprietary estimate of what the P/E might be given factors such as the company’s earnings profile, industry, profit margins, market cap and risk characteristics. This Fair Ratio can be more informative than a simple comparison with peers or the broad industry because it adjusts for company specific attributes rather than assuming all firms deserve the same multiple. Comparing AECOM’s current P/E of 19.4x with the Fair Ratio of 28.4x points to the shares looking undervalued on this earnings based view.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your AECOM Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced here as a simple way for you to attach a clear story about AECOM’s future revenue, earnings and margins to a financial forecast, link that forecast to a fair value, and then compare that fair value with the current share price on Simply Wall St’s Community page. On that page, Narratives created by millions of investors are refreshed when new information such as earnings or news arrives. For AECOM you might see one Narrative that lines up with the more optimistic fair value of about US$152.0, another that aligns with the more cautious fair value of about US$101.0, and by choosing the story that best matches your own view you can use these different fair values as a reference point for deciding whether the current price looks high, low or close to what you think is reasonable.
Do you think there's more to the story for AECOM? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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