KBR’s Relative Valuation Compared to Its Peers



Relative valuation

It’s smart to benchmark a company’s valuation with the valuation of its industry peers. The PBV (price-to-book value) is the ratio of a company’s market value of equity to the book value of its equity. The price signifies the current market price of a company’s stock, and book value is its total assets after deducting the company’s liabilities. The price of a stock is proxy for how the market rates the company, while book value depicts the assets owned by the company.

Investors interested in the industrials sector frequently track the PBV ratio for company valuations.

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Among its peers in the industrial (XLI) sector, KBR has the highest PBV ratio for 2017 at 2.95x. It’s followed by Fluor (FLR) at a PBV ratio of 2.0x for 2017. Jacobs Engineering (JEC) is next with a 2017 consensus PBV ratio of 1.72x. Chicago Bridge & Iron Company (CBI) has a PBV ratio of 1.41x based on its 2017 consensus estimates, which means it could be undervalued.

Analyst recommendations

Of the 13 analysts covering KBR, nine (or 69%) have recommended a “strong buy” or “buy,” and three (or 23%) have recommended a “hold.” One analyst (or 8%) has recommended a “sell.” A lot of “buy” recommendations might imply that the stock is undervalued.

The consensus target price for the next 12 months is $21.38 against a market price of $18.93 on December 8, 2017.

Notable analyst ratings

Credit Suisse (CS) reiterated its “outperform” rating for KBR stock with a target price of $22 as of November 2, 2017. D.A. Davidson downgraded KBR stock from “buy” to “neutral” on November 1, 2017. However, it raised the target price from $20 to $22. Citigroup (C) restated its “neutral” rating but raised the target price to $20 from $17 on October 27, 2017.


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