QUANTA SERVICES INC (NYSE:PWR) – A Quality Stock with Strong Growth and Financial Health

QUANTA SERVICES INC (NYSE:PWR) stands out as a potential candidate for quality investors, meeting key criteria for long-term growth, profitability, and financial stability. The company, which provides infrastructure solutions for the electric power, renewable energy, and utility sectors, has demonstrated consistent performance and efficient capital allocation.

Why PWR Fits the Quality Investing Criteria

• Revenue and EBIT Growth: Over the past five years, PWR has delivered annual revenue growth of 11.67% and EBIT growth of 17.91%, indicating not only top-line expansion but also improving operational efficiency.
• High ROIC: The company’s Return on Invested Capital (excluding cash and goodwill) stands at 20.77%, well above the 15% threshold for quality stocks, reflecting effective use of capital.
• Debt Management: With a Debt-to-Free Cash Flow ratio of 3.10, PWR could repay its debt in just over three years using current cash flows, signaling strong financial health.
• Profit Quality: The five-year average Profit Quality (FCF/Net Income) is 138.11%, meaning the company converts more than 100% of net income into free cash flow—an indicator of earnings reliability.

Fundamental Analysis Summary

Our report highlights PWR’s strengths and areas to consider:

• Profitability: The company scores well on margins and returns, with improving operating and profit margins over time.
• Growth: Both past and expected future growth are strong, with analysts projecting 11.67% annual revenue growth and 14.52% EPS growth.
• Valuation: PWR trades at a premium (P/E of 36.92), which may be justified by its growth prospects but warrants caution for value-focused investors.
• Financial Health: While debt levels are manageable, the company’s ROIC currently sits below its cost of capital, a point to monitor.

For investors seeking stable, high-quality businesses with growth potential, PWR presents a compelling case.

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Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.