Federal Signal is a designer and manufacturer of products and total solutions that serve municipal, governmental, industrial and commercial customers. The Company operates three groups: Environmental Solutions, Safety and Security Systems and Fire Rescue. The company was founded in 1901 and is based in Oak Brook, Illinois.
FSS Price Forecast Based on DCF Valuation
DCF Fair Value Target:
Below please find a table outlining a discounted cash flow forecast for FSS, in which we model out valuation assuming a variety of terminal growth rates. To summarize, we found that Federal Signal Corp ranked in the 25th percentile in terms of potential gain offered. Our DCF analysis suggests the stock is overvalued by about 58.83%. In terms of the factors that were most noteworthy in this DCF analysis for FSS, they are:
The stock's equity weight, or the proportion of capital from equity relative to debt, is 86. Its equity weight surpasses that of 74.63% of free cash flow generating stocks in the Industrials sector.
FSS's estimated cost of debt, based largely on its market capitalization and its interest coverage ratio, is 2%; for context, that number is higher than 34.19% of tickers in our DCF set.
Federal Signal Corp's interest coverage rate -- a measure of gross earnings relative to interest payments -- comes in at 20.72. This coverage rate is greater than that of 86.79% of stocks we're observing for the purpose of forecasting via discounted cash flows.
Terminal Growth Rate in Free Cash Flow
Return Relative to Current Share Price
GD, NLSN, VRSK, PATI, and USAK can be thought of as valuation peers to FSS, in the sense that they are in the Industrials sector and have a similar price forecast based on DCF valuation.
The value trap is the tendency of a value approach to buy a decelerating company. The value trap has been a major problem for value investors over the past two decades. The most obvious value trap is the cyclical stock at cycle peak. Because the cash flow acceleration has been very strong throughout the cyclical […]