When a stock has lost a lot of value, it is often a good time for investors to consider buying low, particularly if the company has solid fundamentals or is in an industry poised for a turnaround.

But before doing so, itʻs important to examine why it dropped, and what the company has done to address any issues. Take, for example, Fluor (NYSE:FLR), an Irving, Texas-based construction and engineering company that works primarily in the oil and gas and government sectors.

Fluor has had a rough couple of years. The stock price was down 41.3% in 2019, and over the past three years, through Jan. 31, it's dropped about 67%. From the beginning of the year to the time of this writing, its share price is down about 4% to around $18. Is it a good time to buy?

a construction worker looking up at a crane

Image Source: Getty Images.

Strategic review yields new focus

The company laid out an operational restructuring plan in the third quarter of last year designed to right the ship. In its most recent earnings report in the third quarter, there was a net loss from continuing operations of $782 million compared to net earnings of $69 million from the previous year's quarter. 

The strategic review calls for refocusing the business on the core markets of engineering, construction, and maintenance services. Thus, it plans to sell off its government and equipment rental businesses, as well as surplus real estate and other non-core assets. These moves are expected to generate about $1 billion in proceeds.

The restructuring is also designed to help the company better execute on its backlog. The company has seen its backlog rise, particularly in the energy and chemicals segment. Meanwhile, new awards have dropped sharply year-over-year, to $2.6 billion at the end of the third quarter from $6.3 billion the previous year.

The problem, as my colleague Lee Samaha explained, is that Fluor had been overly aggressive in bidding on projects, and many of them were fixed-price contracts that incurred charges that ate into earnings. So, the company will now only pursue fixed-price contracts that adhere to strict criteria. 

This will help create a future backlog thatʻs comprised of higher quality projects. 

"As a result of this process, I believe we have a better understanding of our backlog, and I have confidence that our backlog can positively drive future results," Fluor president and CEO Carlos Hernandez said on the third quarter earnings call. "We are committed to following a clear criteria to pursue the right contracts with the right terms, and we believe our new pursued criteria will help us de-risk the business and deliver higher margins."

Should you buy?

Fluor reports fourth-quarter earnings on Feb. 18, and weʻll get a better picture at that time on how they are executing on this strategy. It seems like the company is headed in the right direction.

In late January there was good news as Fluor was awarded a project management consultancy services contract by Bharat Petroleum Corporation Limited (BPCL) at its refinery and petrochemicals complex in India.

Cautious investors may want to wait for fourth-quarter earnings for more clarity on how the restructuring is progressing before investing. However, at this valuation and with its restructuring plan, Fluor is a stock worth keeping an eye on.