John Mirshekari of Fidelity Investments, a mutual fund
as his stock pick.
- One of the largest, most diverse engineering companies in
- It has a $53 stock price.
- It's a good business that's undervalued due to poor capital
allocation historically and a lack of trust in return of
capital. Conditions are in place, however, to repurchase
- Stock has a chance to double in next two years.
- Four-year free cash flow: $1.6 billion. Stock 9 times
four-year trailing FCF.
- Tangible returns on capital 17% last decade. Management
hasn't maximized value through capital allocation. Lowest
valuation in the industry.
- URS is analogous to
18 months ago, when it was 6 times earnings. AECOM is URS'
closest competitor. AECOM was struggling until it decided to
stop mergers and acquisitions and focus on more stock
repurchases. As Mirshekari put it, they went from "glutton to
capital." The result? The stock is up 40% year-to-date.
- URS is similarly undervalued because investors thing
another acquisition is coming. However, the company is
committed to capital allocation.
- At 9 times earnings, URS is at a significant discount to
industry average of 14 times earnings.
- Target price: $98 by 2015, an increase of nearly 100% from
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.