Chicago Bridge & Iron (NYSE:CBI), the 100-year-old engineering and construction company, just can't seem to catch a break. Not only is it still awaiting final judgment in its ongoing court battle with Westinghouse, but demand for its services, particularly from the oil and gas sector, continues to be lackluster. However, despite these current difficulties, now is a great time to add CB&I to your portfolio; here's why.

Recent events

There are three important factors currently affecting Chicago Bridge & Iron's prospects. First is CB&I's ongoing dispute with Westinghouse concerning the valuation of current assets tied to CB&I's sale of its nuclear plant construction business to Westinghouse. CB&I lost a recent court case (sending shares down some 5%), and a conclusion now rests with an mediator sometime in mid-2017. Second is the lackluster market for the company's services. CB&I is still considered to be the best in the business, as evidenced by its near 100% book-to-bill ratio, but the odds in the near term of energy companies (particularly oil and gas customers) shelling out cash for the large projects CB&I is famous for are slim.

A steel bridge lit by a shaft of sunlight

Image source: Getty Images.

The final factor investors should be aware of is more speculative: the forthcoming policies of President Donald Trump. Shares have experienced a modest resurgence lately (up 12% since Nov. 10, 2016) in anticipation of Trump-led domestic infrastructure spending.

A bit of history

If you're a prospective investor, don't be overwhelmed by all the above: It's business as usual for the company. Formed in Chicago in 1889 to -- that's right -- engineer and build bridges, CB&I has seen more than its fair share of ups and downs. Now, not only is it a global company headquartered in the Netherlands, but it has a record of producing both profits and free cash flow when the chips are down:

CBI PE Ratio (TTM) Chart

CBI PE Ratio (TTM) data by YCharts.


FY 2011FY 2012FY 2013FY 2014FY 2015
Net income $255 million $302 million $454 million $544 million ($504 million)
Free cash flow $373 million $130 million ($203 million) $146 million ($135 million)

Data source: S&P Global Market Intelligence.

First, it should be noted that the loss in FY 2015 was due to revenue recognition accounting and other nuances of the GAAP system. Don't ignore these figures, but know that what matters with companies like CB&I is the long-term picture. Here, things look good, Fiscal year 2015's GAAP loss was more than made up for by the last 12 months ending Sept. 30, 2016, which saw the company generate $287 million in GAAP net income and $550 million in free cash flow. Not only is Chicago Bridge & Iron still solidly profitable, but it is using its profits to build a solid foundation for the future.

The bullish view

Chicago Bridge & Iron's reputation and reach all but guarantee that it will continue to be in demand for decades to come. So, the thrust of the current bull case is found in the company's current valuation and the trajectory profits are likely to take:

Forward P/E 6.8
Estimated long-term growth rate 9.5%

Data source: S&P Global Market Intelligence.

With the stock market at record highs, one could do worse than buy into a profitable, storied business that is likely to generate increased earnings in the years ahead (fueled by, among other things, a rebound in energy-related infrastructure spending).

The bearish view

There are two reasons not to place one's chips on Chicago Bridge & Iron. First, CB&I is highly dependent on global economic growth. Uncertainty surrounding not just the U.S. but the global economy has become heightened lately. Also, it has been eight years since the last recession, an economic event that historically happens every five to 10 years like clockwork. Second, should anticipated increases in infrastructure- and energy-related spending fail to materialize, the company's business and stock price will likely suffer.

Foolish final thoughts

On balance, Chicago Bridge & Iron's shares trade for historically low valuations amid a broad stock market that continues to rise. The continued expansion of the market's earnings multiple should immediately make CB&I interesting to investors. Mix in the fact that it continues to generate cash and is also expected to grow profits into the next decade, and you've got a great potential winner to add to your portfolio. 

Sean O'Reilly has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.