Balfour Beatty is a leading international infrastructure group. They finance develop, build and maintain vital infrastructure that we all depend on in the UK and other parts of the world. Shares in Balfour plunged 52.35p to 172.55p in September 2014 due to programme slippage, resource and skills shortages, poor operational delivery and cost inflation pressures. As soon as the 3rd quarter profits in 2014 were announced the shares plummeted massively.
This trend of poorly managed contracts has continued in 2016. The group has been dragged down by UK construction contracts that were won on wafer thin margins and were then poorly managed. In the half year of 2016 the company made a £7m profit which is up from the HY of 2015 when it was £(-130)m. This shows an improvement after struggling for quite a few years.
The 52 week range – This reflects the lowest and highest price the stock has traded over the past 52 weeks. For BB, this is 184 – 299 which is quite volatile. The company has a market cap of 1.9bn. The market cap is the market value of a company’s outstanding shares. This figure is found by taking the stock price and multiplying it by the total number of shares outstanding.
Small Cap – Under $1 billion
Mid Cap – $1 billion – $10 billion
Large Cap – $10 billion plus
Market cap gives you a starting place for evaluation. From a market cap point of view I would be comparing BB with Carillion which is smaller in turns of market cap but much better in historical profitability. Interserve, Kier group, and Morgan Sindall are all smaller in turns of market cap but have been more profitable also., so it seems like the competition are better companies. There’s nothing that is tempting in terms of investing in BB at the moment. They are at least recently profitable, have a huge turnover, negative EPS and a PE of -13.72. The fact that its struggling with the quality of projects shows that there is a lack of innovation and I wouldn’t be surprised if the competition started to eat into its market share.