Fluor Corp (NYSE:FLR) Analysis: A Peter Lynch GARP Investment Case

The investment philosophy created by Peter Lynch focuses on finding companies with good growth potential that are available at fair prices, a method known as GARP, or Growth At a Reasonable Price. This method does not use the extremes of pure growth or deep value investing, but looks for businesses with consistent earnings increases and good financial condition that the market has not priced too high. By concentrating on basic measures such as earnings growth, profit generation, and debt amounts, investors can create a varied, long-term portfolio intended to handle market ups and downs.

An Examination of Fluor Corp (NYSE:FLR)

Fluor Corp (NYSE:FLR) is a worldwide engineering, procurement, and construction firm based in Irving, Texas. It offers project management services in many different areas, such as energy solutions for oil, gas, and power markets, urban solutions for infrastructure and life sciences, and mission solutions for U.S. government agencies. This variety in operations fits with the Lynch idea of investing in businesses that are easy to understand, including those in more conventional or industrial fields.

Fit with Peter Lynch Standards

The stock was found using a filter based on Peter Lynch's investment rules, which look for consistent growth, fair pricing, and good financial condition. An inspection of the available data indicates how Fluor Corp matches these particular standards.

• Consistent Earnings Growth: Lynch liked companies with good, but not extreme, earnings growth. Fluor's earnings per share have increased at an average yearly rate of about 27.7% over the last five years. While this is higher than the filter's top limit of 30%, showing very strong past results, it indicates the company's notable ability to expand profits that Lynch wanted.
• Fair Pricing via PEG Ratio: A key part of the Lynch method is the Price/Earnings-to-Growth (PEG) ratio, which tries to find companies whose price is supported by their growth rate. A PEG ratio of 1 or lower is seen as good. Fluor Corp's PEG ratio of 0.65, calculated from its past five-year earnings growth, implies the stock could be fairly valued compared to its historical growth path.
• High Profitability: Lynch needed a high Return on Equity (ROE) to make sure the company is effectively creating profits from money investors put in. Fluor's ROE of 65.27% is much higher than the filter's 15% minimum, putting it in the leading group in its field and showing very good profit generation.
• Good Financial Condition: To reduce risk, the strategy selects for companies with little debt and enough cash for short-term needs.
  • Fluor's Debt-to-Equity ratio of 0.21 is much lower than the filter's limit of 0.6 and matches Lynch's own liking for a ratio under 0.25, showing a careful financial setup with very little use of debt.
  • The company's Current Ratio of 1.45 meets the need for being at least 1, indicating it has enough short-term resources to pay for its immediate bills.

Fundamental Analysis Summary

A thorough fundamental report for Fluor Corp gives an overall score of 3 out of 10, suggesting a medium performance compared to other companies in the Construction & Engineering industry. The report points to a mixed situation. On the good side, Fluor does very well in profit measures like Return on Assets and Profit Margin, and it keeps a sound cash position. However, the report mentions issues about its pricing, which is seen as high on an absolute level for some measures, and its growth, which has been down over the last year for both earnings and sales, although future predictions indicate a small improvement.

Investment Points

For an investor using a GARP strategy, Fluor Corp offers an interesting case based on its specific match with the Peter Lynch filter. Its high past earnings growth, very strong ROE, low debt amount, and good PEG ratio are all positive signs that fit the idea of purchasing growing companies at a fair price. The lower fundamental score, caused by recent growth difficulties and pricing issues, highlights the need for the "do your homework" step that Lynch always recommended. This means more investigation into the company's contracts, project pipeline, and market position to judge if its past strengths can continue.

Investors wanting to look at other companies that pass this strict investment filter can find more options by using the Peter Lynch Strategy stock screener.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The content should not be relied upon for making investment decisions. All investors should conduct their own independent research and consult with a qualified financial advisor before making any investment.