Chicago Bridge & Iron’s Relative Valuation Compared to Its Peers
Relative valuation is a quick way to benchmark a company’s valuation with its industry peers’ valuations. A PB (price-to-book) value ratio is the ratio of a company’s market value of equity to the book value of equity. Price represents the current market price of a stock. Book value is the company’s total assets minus its liabilities. Price is a proxy for how the market values the company, while book value represents the assets held by the company.
Investors in the construction and industrials sector often track the PB value ratio for company valuations.
Chicago Bridge & Iron Company (CBI) has a PB ratio of 1.41x based on its 2017 consensus estimates. It’s the lowest in our select group of industrial stocks (XLI). KBR has the highest PB ratio for 2017 at 2.95x.
Fluor (FLR) has a PB ratio of 2.0x for 2017, while Jacobs Engineering’s 2017 consensus PB ratio is 1.72x.
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Of the 15 analysts covering Chicago Bridge & Iron, four (26.7%) have recommended a “strong buy” or “buy,” and nine (60%) have recommended a “hold.” Two analysts (13.3%) have recommended a “sell.” The consensus target price for the next 12 months is $16.15 against a market price of $15.55 on November 24, 2017.
Jefferies (JEF) downgraded CBI stock from a “buy” to a “hold” rating on August 16, 2017, and lowered the target price from $35 to $12. Credit Suisse (CS) downgraded CBI stock from “outperform” to “neutral” on July 24, 2017, but raised its target price from $12 to $15 on November 3, 2017. Argus Research has downgraded the stock from a “buy” to a “hold.”