EMCOR Group Inc. (EME)

Posted on Mo 25 Februar 2008 in misc • 2 min read

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Bull.jpgI got tired of listening to those Bloomberg Radio commercials about EMCOR so I decided to check them out to see what the hype was all about. EMCOR Group is one of those companies that isn’t overly exciting, they’re downright boring! EMCOR Group (EME) is part of the Construction Services group and they provide their clients with “construction services relating to electrical and mechanical systems in facilities of all types and in providing services for the operation, maintenance and management of all aspects of such facilities.”

Fundamental Analysis

EMCOR reminds me of the typical engineering company, low gross margins and even lower net profit margins. EME’s current gross profit margin is 11.9% and its net profit margin is a lousy 2.1%. The joke we make about large engineering companies in my field is that they exist just to keep people in employed, not make money! It looks like EME is one of these large corporations that do just this!

It has a PE ratio of 12.9, ROA of 5.1%, ROE of 15.6%, EPS (MRFY) of $1.86, and surprisingly the leader amongst its peer group. EME is outperforming its peers GVA, SXC, PCR, and ARCAY this year! On top of this, analysts expect EME’s earnings to grow between 11.8 to 22.6% this year with its EPS to range between $2.08 to $2.28 (source: S&P). Surprisingly that’s not too bad after all!

Technical Analysis

Technically the chart on EME is short term BEARISH but still long term BULLISH. They reason why I say that is because EME bounced off its 200 WMA and we have not seen a 50/200 WMA death cross happen.

EME-022408

This might be a good place to establish a long term position, a quick monte carlo simulation reveals price levels on the upside of $25, $28, and $31. Immediate downside targets is $22, then $19, and then $16, the worst case scenario is $13.

Neural Net Signal

EMEsnn-022408The EME neural net model indicates no buy or sell signals. In fact the recent market volatility and EME’s price action have made trading EME over the past month a money losing venture.

Bottom line

I like EMECOR because of one reason, our crumbling infrastructure. I’m very BULLISH in the construction services and material sectors over the next 20 to 30 years and I am considering adding any leader, like EME, to my 401k. EME maybe boring and not overly sexy with their profit margins, but if they’re like any other engineering/construction company, they have long term staying power. Consistent growth over a long time wins the game in my mind. Currently its trading its $23.99 and my target for this year will be around $28 to $30/share.

Disclosure: No positions in EME (yet)