Federal Signal Corp /De/ (NYSE: FSS)

Sector: Industrials Industry: Pollution & Treatment Controls CIK: 0000277509
Market Cap 7.21 Bn
P/B 17.97
P/E 168.93
P/S 10.04
ROIC (Qtr) 15.60
Div Yield % 0.36
Rev 1y % (Qtr) 17.04
Total Debt (Qtr) 243.10 Mn
Debt/Equity (Qtr) 0.18
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About

Federal Signal Corporation, a Delaware-based company with the stock symbol FSS, operates in the manufacturing and supplying industry. It offers a wide range of products and integrated solutions for municipal, governmental, industrial, and commercial customers. The company has a global presence, with 23 principal manufacturing facilities in five countries and products sold in all regions of the world. Federal Signal's Environmental Solutions Group (ESG) is a leading manufacturer and supplier of street sweepers, sewer cleaners, industrial vacuum...

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Investment thesis

Bull case

  • Strong operating cash flow of 248.10M provides robust 1.02x coverage of total debt 243.10M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 54.40M provide 2.83x coverage of short-term debt 19.20M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 248.10M provides exceptional 20.01x coverage of interest expenses 12.40M, showing strong debt service capability.
  • Operating cash flow of 248.10M provides strong 16.43x coverage of stock compensation 15.10M, indicating sustainable incentive practices.
  • Strong tangible asset base of 1.20B provides 4.93x coverage of total debt 243.10M, indicating robust asset backing and low credit risk.

Bear case

  • Operating cash flow of 248.10M barely covers its investment activities of (149.40M), with a coverage ratio of -1.66, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 54.40M against inventory of 367.30M, the 0.15 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 248.10M provides thin coverage of dividend payments of (32.90M) with a -7.54 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 54.40M provide limited coverage of acquisition spending of (121.80M), which is -0.45x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 219.70M represents just -13.40x of debt issuance (16.40M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Pollution & Treatment Controls
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 VLTO Veralto Corp 22.76 Bn 26.05 4.31 2.67 Bn
2 ZWS Zurn Elkay Water Solutions Corp 8.65 Bn 43.69 5.10 0.54 Bn
3 FSS Federal Signal Corp /De/ 7.21 Bn 168.93 10.04 0.24 Bn
4 CECO Ceco Environmental Corp 2.77 Bn 53.33 3.85 0.24 Bn
5 PCT PureCycle Technologies, Inc. 1.46 Bn -6.40 258.45 0.43 Bn
6 ERII Energy Recovery, Inc. 0.91 Bn 46.74 6.75 0.00 Bn
7 ADUR Aduro Clean Technologies Inc. 0.33 Bn -23.93 1,516.99 0.00 Bn
8 ARQ Arq, Inc. 0.13 Bn -34.10 1.13 0.03 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.74 3.33
EV to Cash from Ops. EV/CFO 153.42 -65.71
EV to Debt EV to Debt 29.79 136.79
EV to EBIT EV/EBIT 106.96 3.75
EV to EBITDA EV/EBITDA 84.50 8.77
EV to Free Cash Flow [EV/FCF] EV/FCF 178.80 2.21
EV to Market Cap EV to Market Cap 1.00 1.03
EV to Revenue EV/Rev 10.08 89.55
Price to Book Value [P/B] P/B 17.97 6.68
Price to Earnings [P/E] P/E 168.93 15.25
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 7.17 1.12
Dividend Payout Ratio % Div Payout % (Qtr) 13.90 3.26
Dividend per Basic Share Div per Share (Qtr) 0.54 0.07
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 14.92 2.56
Interest Coverage Int. cover (Qtr) 25.90 -107.95
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 30.73 -82.15
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -26.19 79.04
Dividend Growth (1y) % Div 1y % (Qtr) 17.39 1.42
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 9.53 -265.30
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 18.61 -75.61
EBIT Growth (1y) % EBIT 1y % (Qtr) 17.57 -272.40
EBT Growth (1y) % EBT 1y % (Qtr) 19.00 -325.95
EPS Growth (1y) % EPS 1y % (Qtr) 11.17 2,177.75
FCF Growth (1y) % FCF 1y % (Qtr) 8.17 -76.02
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 14.37 7.23
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.06 0.42
Cash Payout Ratio Cash Payout (Qtr) 0.12 0.02
Cash Ratio Cash Ratio (Qtr) 0.20 2.16
Current Ratio Curr Ratio (Qtr) 2.61 3.56
Debt to Equity Ratio Debt/Equity (Qtr) 0.18 0.60
Interest Cover Ratio Int Coverage (Qtr) 25.90 -107.95
Times Interest Earned Times Interest Earned (Qtr) 25.90 -107.95
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 19.30 -775.28
EBIT Margin % EBIT Margin % (Qtr) 15.63 -2,721.83
EBT Margin % EBT Margin % (Qtr) 15.02 -2,762.77
Gross Margin % Gross Margin % (Qtr) 28.90 -44.42
Net Profit Margin % Net Margin % (Qtr) 11.50 -2,763.74