Comfort Systems USA

Lately Eddy from CWS-Blog mentioned Comfort Systems USA as an interesting company (link) The company describes itself as “a leading provider of commercial, industrial and institutional heating, ventilation and air conditioning (“HVAC”) services.” Let’s find out if that company is an interesting investment!

Some sources:

IR Page

Latest Presentation (pdf)

Latest Quarterly report (pdf) , Comfort Systems USA Reports Second Quarter 2016 Results

First Look:

Comfort Systems USA is a nationwide company that provides commercial HVAC*, mechanical and electrical contracting to customers ranging from small businesses to Fortune 500 companies.  Headquartered in Houston, TX.

comfort-systems-logo

When looking at the pictures on their Homepage, I have to think of Precision Castparts or Rolls Royce and their Aftermarket-Revenue. I will find out if Service represents a big part of their revenue.

From the 2016 Presentation:

  • Leading mid-market HVAC* and mechanical systems installation and service provider
  • $1.6B Yearly revenues
  • 7,800+ Employees
  • 35 Operating companies
  • Balanced construction & service portfolio
  • Positive free cash flow for 17 consecutive years

Note: “Service & Maintenance” grew from 13% (from revenue) in 2008 to 18% in 2016. The same number for Rolls Royce is ~50% (link, page 3) It looks like Comfort Systems USA stock is not a big bet on aftermarket revenue.

… I have to think of german Bilfinger while reading the presentation – not a good sign – maybe I am biased? Maybe I am worshiping aftermarket revenue to much?

15/16 Operating CashFlow is lower. Operating CashFlow 2015 was an outlier (see Page 13 Presentation). Operating Income (2-6%) and Adjusted EBITDA (3-7%) margins are not very appealing. Yahoo-Finance shows a very good ~18% Return on Equity for Comfort Systems USA  (link)

 

About their Capital Allocation:  Acquisitions (58%), Share Repurchases (22%), Dividends (20%) – nothing exciting here (Presentation Page 17)

Price:

The shareprice felt from around 33 USD to 28,5 USD since July 2016.

The Company reported net income attributable to Comfort Systems USA for the six months ended June 30, 2016 of $27,558,000 or $0.73 per diluted share,

Last year the company earned around** 1,30 USD this would translate into a P/E-ratio of ~22.

At the moment Comfort Systems USA pays a quarterly dividend of 0,07 USD (link)

Bottom Line:

Construction can be a hard buisines (see reported loss in 2011). I like that they opperate in some kind of niche (HVAC) – but personaly I think they have not realy a moat (see Adjusted EBITDA margin). I can not say much about the management but ~18% Return on Equity sounds not that bad. Comfort Systems USA could be a good company but it is not my cup of coffee. I will stop researching them here.

 

*HVAC is heating, ventilation and air conditioning

**Net income from continuing operations attributable to Comfort Systems USA, Inc. excluding goodwill impairment, changes in the fair value of contingent earn-out obligations, tax valuation allowances and out of period adjustment

Disclaimer: The content contained on this site represents only the opinions of its author(s). I may hold a position in securities mentioned on this site. In no way should anything on this website be considered investment advice and should never be relied on in making an investment decision. As always please do your own research!
Advertisements

5 thoughts on “Comfort Systems USA

  1. Looks like a typical cyclical combined with a turnaround story but also like a ‘too late to the party’-kind of stock since the turnaround was already done beginning 2012. Guess you’re right by postponing a further analysis.

    Liked by 1 person

  2. Hi,
    you are right but I think I will not “waste” my time by looking closer to them.
    I am planning to analyze U-Haul (AMERCO) next, but their homepage is down – strange. Could somebody (maybe from the USA) test if the homepage works with an American IP adress please.

    Like

    • Hi FK,

      you are right. It has not become more because I lost interest in looking further into the company after reading the presentation, earnings news and surfing their IR-Page.
      I wrote the article parallel to my reading in note form.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s