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Top Picks 2020: NV5 Global (NVEE)
01/17/2020 5:00 am EST
The company serves the infrastructure, energy, construction, real estate, and environmental markets. NV5 primarily focuses on five business verticals: construction quality assurance, infrastructure, energy, program management, and environmental solutions.
The company operates out of more than 100 locations nationwide and in Macau, Hong Kong, and the UAE. The company is headquartered in Hollywood, Fla., and went public in 2013.
Fortune magazine named NV5 to its 2019 “Fastest Growing Companies” list, where it ranked #20 overall. The Zweig Group, a publisher of architecture and engineering newsletters, named NV5 #1 on its “Hot Firm List” for 2017, 2018, and 2019.
Since 2011, NV5 revenues have grown at an annual rate of 35.7%, with EPS growing at 38.3% during the same period. Growth has been very stable; the demand for remedying the nation’s crumbling infrastructure should continue to drive NV5’s business.
In our stock study, we are projecting average growth of 17% a year for EPS and revenues through fiscal 2023, putting EPS at $6.02 in five years. However, the midpoint of NV5’s guidance for fiscal 2020 is $4.55, just below a doubling of 2018’s EPS, so our long-term expectation could be quite conservative.
NV5’s pre-tax profit margins have been dancing up and down around the 8.0% level in the last five years, averaging 7.9%. The company has made use of debt to fuel acquisitions but prefers to quickly pay down borrowed funds. The long-term debt-to-equity was just 10.7% at year-end 2018.
Based on a projected high P/E of 25, the stock would reach $150 in five years, a total annual return of 25.9% from the current price of $48. Using a projected low P/E of 12 and 2018 EPS of $2.33 suggests a potential low price of $28, with an upside-downside ratio of 5.2:1.
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