© Reuters. NV5 Global: An Overlooked Infrastructure Stock
NV5 Global, Inc. (NVEE) provides technical engineering and consulting services to public and private sector clients in the infrastructure, utility services, construction, real estate, and environmental markets.
It operates through three segments: Infrastructure; Building, Technology & Sciences; and Geospatial Solutions. In short, it is a comprehensive infrastructure play.
American infrastructure needs are vast, and expanding every day. The American Society of Engineers gave the nation a C- on its most recent report. It estimates that it will take at least $2.6 trillion to fix major problems.
The new American Rescue Plan provides hundreds of billions in funding to states and municipalities to fill budget holes, which include infrastructure spending.
In addition, the bipartisan infrastructure bill has passed the divisive Senate, and awaits a vote in the house which may come on September 27. If passed, this bill would provide $1.2 trillion in funding, of which NV5’s addressable portion would be vast.
Even without these bills NV5 Global has thrived. With this federal investment coming down the pike, NV5 has a bright future indeed.
I am bullish on NVEE stock. (See NV5 Holdings stock charts on TipRanks)
Positive Metrics Before Stimulus Funding Boost
NV5 Global posted tremendous EPS growth during the first six months of 2021.
Diluted EPS rose 96% year-over-year to $1.35 per share. Operating income for the same periods was up 38% to $28.1 million from $20.3 million.
The company has grown revenue at a compound annual growth rate of 26% over the previous decade, from just $63.4 million in 2011, to over $659 million in fiscal 2020.
Note that NVEE stock has a low float. As of July 3rd, 2021 there were only $14.2 million diluted shares outstanding. Because of this, even small gains can be very meaningful on a per share basis.
Savvy Acquisition Already Paying Off
Much of the revenue growth has come from the company’s Geospatial Division, which was created when the company acquired Quantum (NASDAQ:) Spatial during fiscal 2019.
The acquisition cost was $318 million. Already in fiscal 2020, the segment has brought in $148.9 million in revenue, and $30 million in income before taxes.
The company has also been awarded a contract with the U.S. Geological Survey (USGS) worth up to $850 million to provide Geospatial services. The contract is over a period of five years, and follows a similar deal in which NV5 received $135 million over five years from work with the USGS.
Wall Street’s Take
Wall Street analysts are neutral on NVEE stock, with a Moderate Buy rating, based on one Buy and one Hold. The average NVEE price target of $115 implies 11.5% upside potential from current levels of trading.
Summary on NV5 Global
NV5 Global has been thriving and growing for the past several years, and has been net profitable for a decade.
Recent acquisitions by management have been very successful, and will likely perform well in the future. The current state of infrastructure, and necessity to fix it provide secular tailwinds that should last into the foreseeable future.
NV5 Global is capitalizing on opportunities and is a stock investors would be wise to follow more closely.
Disclosure: At the time of publication, Bradley Guichard owned shares of NVEE.
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