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 in revenue growth, profitability, and financial stability. The company provides infrastructure solutions across electric power, renewable energy, and underground utilities, positioning it well for long-term demand.

Why PWR Fits the Quality Investing Criteria

• Revenue and EBIT Growth: Over the past five years, PWR has delivered an 11.5% annual revenue growth and a 17.9% EBIT growth, indicating strong operational performance. EBIT growth outpacing revenue suggests improving profitability, a positive sign for efficiency and pricing power.
• High Return on Invested Capital (ROIC): With an ROIC of 20.8% (excluding cash and goodwill), PWR demonstrates effective capital allocation, well above the 15% threshold preferred by quality investors.
• Strong Free Cash Flow Conversion: The company’s five-year average profit quality (free cash flow to net income) stands at 138%, meaning it converts earnings into cash efficiently. This supports financial flexibility for reinvestment or shareholder returns.
• Manageable Debt Levels: A debt-to-free cash flow ratio of 3.1 suggests PWR can repay its obligations in just over three years, reflecting solid financial health.

Fundamental Analysis Summary

PWR earns a fundamental rating of 6 out of 10, with strengths in growth and profitability but a premium valuation. Key takeaways:

• Profitability: Above-industry returns on assets (4.86%) and equity (12.48%), with improving margins.
• Growth: Consistent revenue and earnings expansion, with analysts forecasting 11.5% annual revenue growth ahead.
• Valuation: The stock trades at a high P/E (39.86), but this may be justified by its growth trajectory.

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Disclaimer

This is not investing advice. The observations are based on current data, and investors should conduct their own research before making decisions.