Is CBI still a good buy? Short answer: yes. In fact, Joel Greenblatt just picked up almost 680,000 shares himself. Chicago Bridge & Iron (CBI), a large global engineering, procurement, and construction company, has recently won several contracts to build large storage facilities and platforms. For instance, on August 6 the company announced that it had been awarded a contract worth over $49 million by Oiltanking Beaumont L.P. This contract involves procurement, engineering, fabrication and construction of 12 internal floating-roof crude oil storage tanks in Beaumont, Texas. They have worked with Oiltanking Beaumont in the past, and apparently have a good relationship with the organization. In addition, CBI also announced at the end of July that it had been awarded a front-end engineering design services contract for Golden Pass Products, LLC.
CBI has had a recent selloff which, in my opinion, renders the organization even more undervalued. New awards in 2013 rose 67% from 2012, largely driven by the Shaw acquisition, and combined backlog at the end of 2013 was $27.8 ($16.8 billion from Shaw). This backlog was up from just $10.9 billion at the end of 2012.
The company’s outlook and current valuation are strong. CBI has a 12-month revenue growth of 42.7%, and 37% more assets than liabilities. Using Peter Lynch’s methods, the current value of the company is 57% higher than it’s share price. Moreover, assuming a 10% Growth Rate, Gurufocus.com’s DCF Calculator currently values the company at $73.9, which leaves a 16% margin of safety.
Peter Lynch Chart:
With these new contracts and the recent selloff, it’s a good time to take a closer look at Chicago Bridge & Iron. Several gurus have made a move on the company over the last year. Remember, as with all investments, do your own research and develop your own conclusions.
Disclosure: No current position held at the time of writing.
Disclaimer: The opinions and ideas in this article are for informational and educational purposes only. They are not a recommendation to buy or sell any stock at any given time. As always, it is imperative for each individual investor to do their own due diligence and perform their own research on any and all stocks before making an investment decision.