Financial Analysis

Date:3/6/2015
To:Lynnette Yerbury
From:Mary Wright
RE:ABM Financial Analysis

Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

ABM Industries Incorporated

As an outside consultant, I have been hired to obtain information and conduct a financial
analysis for ABM Industries Incorporated. My purpose with the information gathered and
examined is to indicate if ABM Industries Incorporated is a healthy investment and weather the
investment be in their debt or equity.
With my investigation of studying the companies materials I found that AMB Industries
is a building maintenance company who aim to have steady quality and savings on building
maintenance. While they aim to save and provide quality they also work to keeping their
properties safe, clean, comfortable and energy efficient, through individual or integrated
solutions (ABM Industries, Discover how we serve your industry). The company started as a
small business washing windows in 1902 forming ABM industries in 1909 which was
incorporated in San Francisco and founded by Morris Rosenberg. The business had been
successful as the cost to start up the business was $4.50 and was able to make a profit on the first
day of $3.50. It has been fascinating to go through the history of ABM Industries Inc., to find
that it started as a small family business (ABM Industries, Discover how we serve your
industry).
ABM industries did not became involved with the New York Stock Exchange until
decades later in 1972. By the mid-1970s, profits increased by a greater percentage than
revenues furthermore there was a 5 percent increase in shareholders equity covering the

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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

preceding year to a total of $27.3 million (ABM Industries, Discover how we serve your
industry).
With a little more current background on the company it helps to compare the financial
analysis with actions taken by the business. In 2010 ABM industries acquired The Linc Group,
LLC with cash of $300 million as they improve operating efficiencies, reduce energy
consumption and lower overall operational costs of critical Facilities (ABM Industries, March
2015). Two other major events that occurred in 2010 was ABM earned $160 million in revenues
from the Ampco System parking, and also acquired all of Diversco outstanding shares who
preform commercial cleaning, facility solutions, and security services. As a result of ABM
purchasing many companies in 2011 they were able to record a $4.2 billion revenue, and ended
up with just about 100,000 employees (this affecting payroll expenses). In 2012 ABM industries
changes their brand to ABM building value. Most recent history in 2013 being that the
company created a website to help and improve customer care. Now having the history
background I will focus on the competition (ABM Industries, Discover how we serve your
industry).

Competition
DTZ, Inc., and ARAMARK are close NYSE competitors with ABM industries Inc.
Moving powerfully forward and upward are the competitors AlliedBarton Security and Comfort
Systems USA with the services they offer and customer care. ABM industries has been
successful in the growing in services as they acquire more companies they also acquire more
services, they are also working on their customer care as shown through their website solely for
customer challenges. ABM is working to become the global leader in Integrated Facility
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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

Solutions (ABM Industries, Discover how we serve your industry). As they strive to become a
global leader suggesting it is poised to outperform it shows that ABM may be an interesting
play thanks to its forward PE of 16.14, its P/S ratio of 0.32, and its decent dividend yield of
2.18% (Zacks Equity Research).

ABM Industries, Inc. - Financial Ratio Analysis

Below includes the current ratio analysis for ABM industries, Inc. that is from their 2014
financial statements. (ABM Industries, Annual Reports) These figures use a number of ratio
differentiation to examine how ABM industries, Inc. has conducted, and to compare with their
industry averages. As I analyzed the most recent financial statement for 2013 and 2014 of ABM
industries Inc. I examined what their strengths and weaknesses were. With the ratio analysis I
will examine four sections that include liquidity, solvency, profitability, and investment potential.
Liquidity
The measurement of liquidity are the short-term ability of the company to pay its
developing commitments, as well as demonstrating its possession of means to cover
unanticipated requirement of cash. The succeeding ratios make up the liquidity summary for
2013 and 2014 financial statements:
Working Capital: Measurement of the companys ability to use current assets to pay off
current liabilities. ABM industries has a positive working capital of $356,108 which
shows that ABM current assets can cover all current liabilities. As hoovers shoes working
capital per share for ABM industries is at a $7.19:1 well above the industry median of
$3.25:1.
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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

Current Ratio: Used as a measurement of a companys available resources to quickly pay

short-term debt. ABM industries has a ratio of 1.7:1 that is significantly higher than the
industry average of 1.35:1.
Cash Ratio: Measures the companys ability to pay of short term debt with cash. ABM
industries ratio is 0.06:1. Although there is not an industry average most companies are
not able to have this ratio as 1:1 because there cash cannot cover all current liabilities.
Acid-Test Ratio/Quick Ratio: Measures the companys ability to use quick assets and
cash to immediately pay current liabilities. ABM industries ratio is 1.26:1, which is
almost double the industry average of 0.88:1.
Overall ABM industries ratios were all above the industry averages. This shows as a strong
overall liquidity for ABM industries as their ability to pay short-term debts is above average.
Solvency
Consists of ratios that measures how a company is compatible to pay off long-term debt,
and their ability to stay in business. This information is important to the stockholders as it
examines how the company can pay interest and ability to pay for face value upon maturity.
Debt Ratio: Uses a companys total assets to pay their total liabilities. ABM industries
has a ratio of 0.57:1 which means that they could not pay off all debt with available
assets. No industry average to compare with.
Debt to Equity Ratio: Specifies the portion of equity used to invest in assets. ABM
industries ratio is 1.31 close to the industry median of 1.51.
Time-interest earned Ratio: Measures a companys potential to fulfill their debt
payments. ABMs ratio is 9.72 while the industry average is 6.69.
When comparing ratio averages ABM industries comes closes except for the time-interest
earned ratio showing almost a fourth of the industry average.
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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

Profitability
Profitability is the companys ability to make a profit (money), what keeps the business
running. Showing the companys capacity to obtain funding or debts and equity based on their
income.
Profit Margin Ratio: Measures the amount of sales dollars kept as money
obtained. ABM industries ratio is 1.52% and the industry average is 7.55%.
Rate of Return on Total Assets: Measures how profitable overall the company is.
ABM industries has a ratio of 4.32% below the industry average of 5.59%.
Asset Turnover Ratio: Determines how sales are generated by the use of assets.
ABM industries has a ratio of 2.42, three times more than the industry average of
0.74.
Earnings per share: Measures the share of common stock and how much net
income was earned for each share. ABM industries earning per share is 0.13%,
with no industry average to compare with Hoovers.
Overall ABM industries ranked high in all ratios and in most instances beat the industry
averages.

Investment Potential

Price Earnings Ratio: Examines the market price of common shares of stock
with earnings per share, and the companys future earnings. ABM industries
Pre/earnings ratio is 22.27 which is below the industry average of 27.86.
Ratio Analysis Conclusion

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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

By completing the Ratio analysis it examines the association of chosen items within
ABM Industries Inc. financial statements. The examination has provided the strengths and
weaknesses of the companys liquidity, solvency, profitability and investment potential.
Throughout the examination of ABM industries ratios we were able to compare them to the
industry averages thanks to Hoovers. In most situations we see that ABM industries
outperformed by beating the industry averages of liquidity, and solvency while profitability and
investment potential ratios were close but below the industry averages. The Company shows
strong in paying off their debts.

Investment
Now that we have completed the ratio analysis we can first state that the company is a
potential investment as they beat or came close to the majority of the industry averages. Taking a
closer look at the investment to decide either debt or equity. As ABM has shown to have stable
ratios looking back at liquidity, solvency, profitability, and investment potential we see that the
strongest were liquidity and solvency, The company showed that their ability to pay debts as
their strong suit. Along with their consistency of financial statements the disclosure notes and
transparency of the company were good. With that being said ABM industries are a stronger debt
investment then equity.

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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

Works Cited
ABM industries. Annual Reports. ABM. SOC3, 2015. Web 09 Mar. 2015
<http://investor.abm.com/annuals.cfm>
ABM Industries. "Discover how we serve your industry." Building Maintenance and Facility
Services from ABM. SOC3, Jan 2015. Web. 06 Mar. 2015.
<http://www.abm.com/Pages/default.aspx>
McLellan, Michael. Salt Lake Community College. Salt Lake Community College. New York
Stock Exchange, 2015. Web. 09 Mar. 2015.
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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

<http://subscriber.hoovers.com.dbprox.slcc.edu/H/company360/competitiveLandscape.ht
ml?companyId=10076000000000>

Zacks Equity Research. Looking for Value? Why It Might Be Time to Try ABM Industries.
Our Research. Your Success. Zacks, 6 Mar. 2015. Web. 9 Mar. 2015.
< http://www.zacks.com/stock/news/166741/looking-for-value-why-it-might-be-time-totry-abm-industries-abm?source=sa>

Appendix A
Sent in a separate file would not transfer to word document.

Appendix B

Liquidity
Working Capital
Current Ratio

2013 (in
thousands)
2013 Ratio Calculation
$356,108
864,632-508,524
1.70
864,632/508,524
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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

Cash Ratio

0.06

Acid-Test Ratio

1.26

Solvency
Debt Ratio
Debt to equity ratio
Times-interest earned ratio

32,639/508,524
(32,639+572,525+36,623)/508,52
4

2013(thousa
nds)
2013 Ratio Calculation
0.57
1,201,729/2.119,236
1.31
1,201,729/917,507
9.72
(72,900+39,552+12,892)/12,892

Earnings Per Share

2013(thousa
nds)
2013 Ratio Calculation
1.52%
72,900/4,809,281
(72,900+12,892)/
4.32%
(2,119,236+1,851,158)/2
4,809,281/
2.42
(2,119,236+1,851,158)/2
132.67
(72,900-0)/(555+544)/2
(72,900-0)/
0.13%
(55,477,813+54,393,907)/2

Investment Potentail
Price/earnings ratio

2013(thousa
nds)
2013 Ratio Calculation
21544.84
28.59/0.0013270

Liquidity
Working Capital
Current Ratio
Cash Ratio
Acid-Test Ratio

2014(thousa
nds)
2014 Ratio Calculation
$400,800
927,200-526,400
1.76
927,200/526,400
0.07
36,700/526,400
1.49
(36,700+748,200+0)/526,400

Solvency
Debt Ratio
Debt to equity ratio
Times-interest earned ratio

2014(thousa
nds)
2014 Ratio Calculation
0.56
1,224,100/2,192,900
1.26
1,224,100/968,800
9.92
(75,600+39,500+12,900)/12,900

Profitabliity
Profit Margin Ratio
ROA
Asset Turnover Ratio
R of Return on Com SH E

Profitabliity
Profit Margin Ratio
ROA

2014(thousa
nds)
2014 Ratio Calculation
1.50%
75,600/5,032,800
(75,600+12,900)/
4.10%
(2,192,900+2,119,200)/2.
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Lynnette Yerbury
3/6/2015
Mary Wright

ABM Financial Analysis

Asset Turnover Ratio

R of Return on Com SH E

2.33
126.00

Earnings Per Share

0.14%

Investment Potentail
Price/earnings ratio

5,032,800/
(2,192,900+2,119,200)/2
(75,600-0)/(600+600)/2
(75,600-0)/
(55,691,350+55,477,813)/2

2014(thousa
nds)
2014 Ratio Calculation
21542.53
29.30/0.0013601

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