What Does Warren Buffett’s Berkshire Hathaway Inc. (BRK.A) See In Chicago Bridge & Iron Company N.V. (CBI)?

Peers for Chicago Bridge & Iron Company N.V. (NYSE:CBI) include Matrix Service Co (NASDAQ:MTRX), Fluor Corporation (NEW) (NYSE:FLR), Jacobs Engineering Group Inc (NYSE:JEC), and Caterpillar Inc. (NYSE:CAT). Matrix is in a similar situation to Chicago Bridge & Iron Company N.V. (NYSE:CBI), with very strong financial results in recent quarters and with the stock currently trading at 14 times forward earnings estimates. It is a smaller company, however, with a market cap of $430 million. Fluor and Jacobs also carry forward P/Es in the 14-15 range. In their most recent quarters, Fluor’s revenue grew 14% compared to the same period in the previous fiscal year, with margins contracting slightly;  Jacobs, conversely, reported a 24% increase in the bottom line but sales were only 4% higher. We wouldn’t rule these companies out, but we’d generally consider earnings growth more sustainable when it results from high revenue growth as well as constant to improving margins. As for Caterpillar, that company has not been performing as well as a year ago. Even though it does trade at a discount to these other businesses, it seems like a less attractive buy.

Obviously a good deal of Chicago Bridge & Iron Company N.V. (NYSE:CBI)’s recent recorded growth has been acquisition related, but its industry does seem to have good prospects due to the tie to shale oil and gas. The valuation is not too expensive and while we might want to wait for another quarter of results we do think that it is at least a prospective value stock.

Disclosure: I own no shares of any stocks mentioned in this article.