Friday, May 31, 2002

Some Companies Get Paid On Time

NEW YORK - Found just under the "cash and equivalents" line on the balance sheet, accounts receivable refers to money owed a business for goods or services already provided. It's useful to consider this item in the context of sales performance. In other words, if sales are rising while receivables are falling, it's a pretty good sign that customers are either paying faster or the company is having fewer collection problems.

Example: Fluor, a contracting and engineering firm based in Aliso Viejo, Calif. The company's swelling backlog of new projects has hit $11.6 billion as of its March quarter, a 14% increase from levels a year earlier. Recent engagements range from building a 365-room Ritz-Carlton resort in the Grand Cayman Islands to constructing test facilities for the Army Corps of Engineers' missile defense research.

Fluor's balance sheet suggests that customers are also paying their bills. For the most recent quarter (ended in March), receivables stood at $564 million, down 25% from $748 million a year earlier. Meanwhile, sales rose 31%, to $2.5 billion, during the same period.

Fluor looks like a company that will benefit from a recovering economy, but the stock hasn't attracted quite the same attention that investors have paid to cyclical sectors such as natural resources or media. Shares of Fluor are trading 38% off a 52-week high set a year ago, and the stock's 2003 estimated P/E of 14 falls well below the S&P 500's estimated multiple of 21.

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