Quanta Services: Undervalued Growth
11/22/2016 8:00 am EST
Stock held in our model Growth Portfolio have bullish charts, strong projected earnings growth, little or no dividends, low-to-moderate P/Es and low-to-moderate debt levels, explains Crista Huff, editor of Cabot Undervalued Stocks Advisor.
Quanta Services (PWR) does not have a glamorous story. It’s simply a very undervalued aggressive growth stock in the industrial sector.
The firm provides specialized infrastructure and network services to the electric power, oil and natural gas industries.
It its geographic areas of operation focus on the U.S., Canada and Australia. The company is based in Houston, TX, with 24,500 employees.
Wall Street expects slow and steady revenue growth, from $7.5 billion in 2015 to over $8.1 billion in 2018.
Revenue growth is coming from all segments of the company, notably from acquisitions, electric power projects and a continued recovery in the natural gas industry.
Quanta Services is benefiting from ongoing upgrades to an aging electrical grid and has a project backlog totaling over $9 billion.
Quanta recently reported third-quarter EPS of 55 cents were on target with Wall Street's expectations. Revenue was $2.04 billion vs. the consensus estimate of $2.08 billion.
Full-year EPS are expected to grow aggressively at 40.5% and 24.4% in 2016 and 2017, The respective P/Es are 18.0 and 14.5.
The stock is undervalued, with its 2017 P/E at the bottom of its long-term P/E range, which often reaches 30-40 and higher. PWR does not pay a dividend.
The long-term debt-to-capitalization ratio is very low at 13%. The stock appears capable of breaking past short-term upside price resistance at 29. I rate the shares a Strong Buy.
By Crista Huff, Editor of Cabot Undervalued Stocks Advisor