AECOM (ACM): what the price requires

At today's price, AECOM (ACM) is priced for -2.5% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/ACM

Headline

FieldValue
TickerACM
CompanyAECOM
Current price$68.49/sh
CompositionCost reimbursable 38% / Guaranteed maximum price 37% / Fixed price 25%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed2.3%
Operating margin today6.6%
Margin compression implied-4.3pp
Implied growth-2.5%
Multiple paid11x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 9.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~5.2pp.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.45σ
cohort percentile (of 225 peers)8
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.62x5expensive
Earnings1.75x4expensive
Relative0.68x3justifies
Growth1.44x3expensive

Families that justify the price: Relative Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.1%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$42.491.61xyesFCF base $0.4B, growth -0% (input: historical growth), terminal g 0.5%, WACC 9.0%, 5yr projection
DCF Exit MultipleGrowth$67.441.02xyesExit EV/EBITDA: 6.1x / 8.1x / 10.1x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$84.700.81xyesP/E 18x (static sector reference · 2026-04), scenarios: 15.2x / 18.0x / 20.8x (bear / base = reference held flat / bull), EV/EBITDA 12x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$42.301.62xyesBV/sh $17.57, ROE (TTM) 22.3%, ke 9.3%
Two-Stage Excess ReturnAsset$65.331.05xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$47.581.44xyesRev $16.0B, growth -0% (input: historical growth; tapered), Terminal P/S: 0.5x / 0.6x / 0.6x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$71.320.96xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.83B × (1−12%) / WACC 9.0% → EPV (no growth)
Residual IncomeAsset$61.071.12xyesBV $17.57 + 5yr PV of (ROE (TTM) 22.3% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$38.911.76xyes√(22.5 × EPS $3.83 × BVPS $17.57) — Graham's conservative floor
EV/EBITDA RelativeRelative$100.450.68xyesEBITDA $1.05B × sector EV/EBITDA 12.0x
FCF YieldEarnings$36.971.85xyesFCF $410.2M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$31.832.15xyesSBC-adj FCF $0.35B (FCF $0.41B − SBC $0.06B) capitalized at Kₑ
Ben Graham FormulaEarnings$3.2121.34xyesEPS $3.83 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/BAsset$21.943.12xyesBV $17.57 × (ROIC 11.3% / WACC 9.0%)
P/Sales SectorRelative$309.240.22xyesRevenue $15.99B × sector P/S 2.5x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$41.411.65xyesEPS $3.83 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$1.8b
Net debt / NOPAT (after-tax)2.06x
Net debt / operating income (pre-tax)1.81x
Interest coverage5.7x
Share count CAGR (buyback)-2.4%
Burning cashno

Bullet Takeaways

Bull Case

The counterintuitive thing about AECOM is that the methods which value it on its assets are looking at the wrong asset. The balance sheet shows a book value of only about $17.57 a share, yet the company earns a trailing return on equity above 22%. A 22% return on a thin equity base is not a fluke of leverage; it is the signature of a business whose real capital is intellectual, the engineers, the client relationships, and the contracted backlog, none of which sit on the balance sheet at anything like their economic worth. That is why a price several times book value can still be reasonable: you are not buying the building, you are buying the franchise that wins the next decade of infrastructure work.

The substance of that franchise is visibility. AECOM reports record backlog, and backlog in this business is contracted future revenue: the company explains that it includes in backlog "revenue we expect to record in the future where we have been awarded" the work. A growing, record backlog with double-digit pipeline growth means the revenue line for the next several years is unusually well-sighted for a services firm, and it is concentrated in the parts of the economy with the most durable spending, transportation, water, environmental remediation, and government modernization. The selection to continue serving the Department of Homeland Security on critical-infrastructure modernization is the kind of long-cycle, re-competing government relationship that compounds.

The third leg is a clean, shareholder-friendly financial model. Net debt of about $1.85 billion sits at under two times operating income, interest is covered roughly five times, the company pays a dividend and has been retiring stock, the share count is down about 2.4% a year. An asset-light firm converting high returns on a small equity base into free cash flow, then returning that cash, compounds per-share value without needing to plow capital back into plant. The bull case is that AECOM is a high-return, low-capital franchise with a record contracted backlog, and the valuation methods that anchor on its tangible book systematically undervalue exactly the kind of business it is.

Bear Case

The bear case begins with the cycle the backlog cannot fully insulate. AECOM tells investors directly that demand for its services "is cyclical and vulnerable to sudden economic downturns and reductions in government and private industry spending." Backlog is reassuring but it is not a guarantee of revenue at a given margin: much of it carries client-discretionary options and not-to-exceed ceilings, and the company calculates backlog to include amounts only "to the extent of the remaining estimated amount" on such contracts. When public budgets tighten, projects get deferred, scopes shrink, and the conversion of backlog into billed, profitable revenue slows. A firm whose top line depends heavily on government infrastructure spending is a firm whose growth is set in legislatures as much as in boardrooms.

The second risk is in how the work is priced. A quarter of revenue comes from fixed-price contracts, where AECOM bears the cost of overruns, and the rest spans guaranteed-maximum-price and cost-reimbursable structures. The filing's auditors single out "Revenue Recognition - Contract cost and claim recovery estimates" as a critical audit matter, which is the formal way of saying that judging how profitable a long project will be requires estimates that can prove wrong. On thin engineering-services margins, an operating margin near 6.3%, a few mis-estimated large projects can absorb a meaningful share of a year's profit, and the cost is concentrated in exactly the fixed-price work that looks most attractive when it is bid.

The valuation leaves modest room for those risks. At the current price the static methods that value the company on its assets and on normalized earnings power both say it is fully to richly valued; only the peer-multiple lens comfortably reaches the price. The market is paying about 11 times company-wide operating income, and while that is not demanding in the abstract, it embeds continued record backlog converting at stable margins. Leverage is moderate rather than dangerous, but in a services firm there is no hard-asset floor under the equity if the cycle turns: the value is the people and the contracts, and both can walk or be deferred. The bear does not require a collapse, only a normal infrastructure-spending pause, for the price to look like it paid peak-cycle economics for a business whose cycle had not yet turned.

Valuation

Inverted on operating income, AECOM looks undemanding rather than stretched. At $68.82 (June 27, 2026) the market is paying about 11 times company-wide operating income, a multiple that implies operating profit going roughly nowhere, about negative 2% a year over the next five years. The price is not asking the business to grow; it is asking it to hold roughly flat. For a firm reporting record backlog and double-digit pipeline growth, that is a low bar, and it is the heart of the constructive read.

The families of methods split along the line you would expect for an asset-light, high-return services firm. The asset-value methods anchor on a book value of about $17.57 a share and call the stock expensive, but that is precisely the lens that misreads a business whose capital is its people: the same book base produces a 22% return on equity, so book value understates the franchise. The earnings-power method, capitalizing normalized operating income with no growth, lands near the price, and the peer-multiple lens, applying the professional-services cohort's multiples, comfortably reaches it. So the honest summary is that the methods grounded in earnings and peers support the price, while the methods grounded in tangible assets do not, and for this kind of company the earnings-and-peers reading is the relevant one.

Solvency is sound and bounds the downside reasonably. Net debt of about $1.85 billion sits at under two times operating income, with interest covered roughly five times, the company is not burning cash, and it both pays a dividend and buys back stock. There is no hard-asset floor under a consulting firm, so the real downside protection is the recurring, contracted nature of the backlog and the diversity of clients rather than a liquidation value. The price rests on that backlog continuing to convert at current margins; the methods say the bet is reasonable so long as the infrastructure-spending cycle does not turn against it.

Catalysts

The headline catalyst is a guidance raise built on backlog. AECOM increased its fiscal 2026 outlook on the strength of record backlog and double-digit pipeline growth, guiding net income from continuing operations of $617 million to $696 million and EPS of $4.25 to $4.86. Because backlog is contracted future revenue, a record reading is the most direct forward signal this kind of business produces, and the raise reflects management's confidence that the conversion is on track.

The project wins point to where the growth comes from. AECOM was selected to continue providing architecture and engineering services to the Department of Homeland Security for critical-infrastructure modernization, a long-cycle government relationship, and it joined a UK consortium with Type One Energy and Tokamak Energy to pursue a private-sector-led fusion power plant project, a smaller but optionality-rich engagement in an emerging energy market. The first is the steady core of the business; the second is the kind of frontier infrastructure work that keeps the pipeline diversified.

Sentiment is favorable, with the covering analysts leaning Buy to Strong Buy and average targets set above the current price. The events that matter from here are the quarterly backlog and pipeline prints and the margin on converted work, because the valuation rests on record backlog turning into billed revenue at stable margins, and any slip in government or private infrastructure spending would show up first in the pipeline figures.

Peer Cohorts (Per Segment, With Filing Citations)

AECOM Capital (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

company FY2026 guidance, 2026 · company announcements, 2026 · analyst consensus, 2026

View the full interactive ACM report on boothcheck