FLT Stock Study (8-2-23)

Posted by Mark on October 13, 2023 at 06:47 | Last modified: August 2, 2023 13:25

I recently did a stock study on Fleetcor Technologies Inc. (FLT) with a closing price of $251.06. My previous study is here.

Value Line writes:

     > FLEETCOR Technologies, Inc. is a leading independent provider of fuel
     > cards, and payment products and services throughout North America,
     > Latin America, and Europe. Its corporate charge cards cater to
     > commercial fleets, major oil companies, petroleum marketers, and
     > government entities. The company owns and operates proprietary
     > closed-loop networks electronically connected to merchants, through
     > which it captures and reports customized information.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 13.6% and 15.5%, respectively. Lines are mostly up, straight, and parallel except for a sales decline in ’20 and EPS declines in ’15 and ’20. PTPM leads peer and industry averages while ranging from 31.5% in ’15 to 45.1% in ’13 with a last-5-year mean of 39.8%.

Also over the past decade, ROE has tracked evenly with the industry and ahead of peer averages while ranging from 12.0% in ’15 to 41.1% (possible upside outlier) in ’22 with a last-5-year mean of 26.4%. Debt-to-Capital is higher than peer and industry averages while trending [uncomfortably] higher from 54.4% to 73.5% with a last-5-year mean of 62.8%.

Interest Coverage is 6.7 or 13.8 according to M* or Value Line, respectively. M* reports Quick Ratio as 0.59. Value Line gives a B++ grade for Financial Strength. CFRA writes: “balance sheet is in a good place at 2.7x net debt-to-EBITDA with healthy liquidity of ~$2.1B.”

With regard to sales growth:

• CNN Business projects 11.8% YOY and 11.1% per year for ’23 and ’22-’24, respectively (based on 16 analysts).
• YF projects YOY 11.1% and 10.3% for ’23 and ’24, respectively (18 analysts).
• Zacks projects YOY 11.7% and 9.3% for ’23 and ’24, respectively (8).
• Value Line projects 9.5% per year from ’22-’27.
• CFRA projects 11.9% YOY and 10.3% per year for ’23 and ’22-’24, respectively.
• M* provides a 2-year ACE of 10.9%.

I am forecasting conservatively below the range at 8.0% per year.

With regard to EPS growth:

• CNN Business projects 6.3% YOY and 11.0% per year for ’23 and ’22-’24, respectively (based on 16 analysts), along with 5-year annualized growth of 12.5%.
• MarketWatch projects 11.4% and 12.7% per year for ’22-’24 and ’22-’25, respectively (19 analysts).
• Nasdaq.com projects 15.6% YOY and 17.0% per year for ’24 and ’23-’25 (7, 7, and 2 analysts for ’23, ’24, and ’25).
• Seeking Alpha projects 4-year annualized growth of 12.5%.
• YF projects YOY 6.1% and 15.6% for ’23 and ’24, respectively (17), along with 5-year annualized growth of 12.5%.
• Zacks projects YOY 6.1% and 15.8% for ’23 and ’24, respectively (8), along with 5-year annualized growth of 12.5%.
• Value Line projects 10.4% per year from ’22-’27.
• CFRA projects 7.0% YOY and 10.6% per year for ’23 and ’22-’24, respectively, along with a 3-year CAGR of 16.0%.

Multiple long-term estimates of 12.5% make me suspicious of data duplication. Three of the four (Zacks excluded) are actually presented as 12.45% (I usually round to one decimal place when blogging). In case multiple sources are indeed reporting numbers from the same analyst(s), I would be less certain about that number and forecast more conservatively.

I am forecasting below the long-term-estimate range (mean of five: 12.1%) at 9.0% per year. I will use ’22 EPS of $12.42/share as the initial value rather than 2023 Q1 $12.55 (annualized).

My Forecast High P/E is 21.0. Over the past decade, high P/E has ranged from 21.4 (’22) to 43.0 (’15) with a last-5-year mean of 29.9. The last-5-year-mean average P/E is 24.1. I am forecasting below the entire range.

My Forecast Low P/E is 13.0. Over the past decade, low P/E has ranged from 13.0 (’22) to 34.9 (’15) with a last-5-year mean of 18.3. I am forecasting at the bottom of the range.

My Low Stock Price Forecast (LSPF) of $161.50 is default based on initial value of $12.42/share. This is 35.7% below the last closing price and 20 cents less than 2022 and 52-week lows.

These inputs land FLT in the HOLD zone with a U/D ratio of 1.7. Total Annualized Return (TAR) is 9.8%.

PAR (using Forecast Average—not High—P/E) is 5.3%, which is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 310 studies done in the past 90 days (my study and 90 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.0%, 11.9%, 25.0, and 16.9, respectively. I am lower across the board. Value Line projects a future average annual P/E of 14.5, which is lower than MS (21.0) and mine (17.0).

MS high / low EPS are $21.89 / $11.66 vs. my $19.11 / $12.42 (per share). My high EPS is lower due to a lower growth rate [and much less than Value Line’s projected $26.35/share to offset its lower projected average annual P/E].

MS LSPF of $164.70 implies a Forecast Low P/E of 14.1 vs. the above-stated 16.9. MS LSPF is 16.4% less than the default $11.66/share * 16.9 = $197.05, which results in more conservative zoning. MS LSPF remains 2.0% greater than mine.

My TAR (over 15.0% preferred) is much less than MS 17.1%.

MOS backing the current study seems robust.

I track a few different valuation metrics. PEG per Zacks is 1.2 (fairly valued) and 2.0 (slightly overvalued) per my projected [forward] P/E. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is undervalued at 0.83. Kim Butcher’s “quick and dirty DCF” prices the stock at 16.0 * [$30.50 – ($0.00 + $2.25)] = $452.00 thereby suggesting the stock to be undervalued by 44.0%.

I would look to re-evaluate FLT under $222/share.

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