Stay Invested in These NYSE-Listed Stocks - ABM, FSM

ABM Industries Incorporated

ABM Details

ABM Industries Incorporated (NYSE: ABM) offers integrated facility solutions through five business segments: Aviation, Business & Industry (B&I), Education, Technology & Manufacturing (T&M), and Technical Solutions. It provides janitorial, parking, facility services, building & energy solutions, and airline services across its varied business segments. The company generates most of its revenue from the Business & Industry segment.

Latest News:

• Quarterly Dividend: On March 08, 2022, the company declared a quarterly dividend of USD 0.195 per common share, payable on May 02, 2022, to shareholders of record on April 07, 2022.
• Share Repurchase: During the first quarter, the company repurchased 0.3 million shares of its common stock under its standing authorization for USD 13.3 million at an average share price of USD 44.23.

Q1FY22 Results:

• Growth in Topline: The company reported YoY growth of 29.74% in revenue to USD 1.94 billion in Q1FY22 (ended January 31, 2022) from USD 1.49 billion in Q1FY21, due to 49.18% growth in the Business & Industry segment.
• Growth in Profitability: In Q1FY22, ABM's net income increased to USD 76.0 million from USD 74.6 million in Q1FY21.
• Cash and Debt Position: The company had USD 46.60 million in cash and cash equivalents as of January 31, 2022, and total debt of USD 1.00 billion.

Key Risk:

• Dependence on Long-term Clients: Long-term client relationships are usually more profitable than short-term client partnerships because the company incurs higher initial expenditures on new contracts until labor management and facility operations stabilize. As a result, even if ABM generates the same revenue from new clients, its financial position and cash flow may be jeopardized if long-term clients leave.
• Dependence on Third-Parties: When ABM cannot complete a task on its own, it turns to subcontractors or other parties, such as joint venture partners, to finish the job. Any breach of contract by these third parties could jeopardize the company's operations.

Outlook:

FY22 Guidance (Source: Q1FY22, Earnings Release, March 08, 2022)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

ABM's stock price has surged 8.33% in the past three months and is currently leaning towards the mid-band of its 52-week range of USD 38.44 to USD 54.46. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 51.63.

Considering the slight correction in the stock price, decent top performance, consistent dividend yield, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 44.99, up 0.85% as of March 25, 2022.

Three-Year Technical Price Chart (as of March 25, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Fortuna Silver Mines Inc.

FSM Details

Fortuna Silver Mines Inc. (NYSE: FSM) is a precious and base metal mining company with operations in Argentina, Burkina Faso, Mexico, Peru, and Côte d'Ivoire. The open-pit Lindero gold mine (Lindero) in northern Argentina, the underground Yaramoko mine (Yaramoko) in southwestern Burkina Faso, the underground San Jose silver and gold mine (San Jose) in southern Mexico, the underground Caylloma silver, lead, and zinc mine (Caylloma) in southern Peru, and the open pit Séguéla gold mine (Séguéla) in southwestern Côte.

FY21 Results:

• Surge in Topline: The company reported a significant increase in sales to USD 599.85 million in FY21 (ended December 31, 2021) from USD 278.97 million in FY20.
• Boost in Profitability: FSM reported an increase in net income to USD 59.40 million in FY21 vs. USD 21.55 million in FY20.
• Cash and Debt Position: As of December 31, 2021, the company had cash & cash equivalents (including short-term investments) of USD 107.52 million and total debt of USD 186.89 million.

Key Risk:

• Metal Price Risk: The highly fluctuating and uncontrollable worldwide market prices of gold, silver, and base metals substantially impact FSM's operations. As a result, any unfavourable price movement could harm the company's bottom line.
• Regulatory Risk: FSM is a metal mining company subject to several federal and state restrictions. As a result, the imposition of harsher rules or noncompliance with required legislation may harm the company's profitability.

Outlook:

FY22 Guidance (Source: FY21 Earnings Presentation, March 24, 2022)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

FSM's stock price has fallen 41.46% in the past twelve months and is currently leaning towards the lower end of its 52-week range of USD 2.91 to USD 7.98. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 4.30.

Considering the significant correction in the stock price, strong production results, solid topline and bottomline performances, positive outlook, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the closing price of USD 3.84, down 1.54% as of March 25, 2022.

Three-Year Technical Price Chart (as of March 25, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

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