This Under‑the‑Radar Grid Infrastructure Powerhouse Could Be a Generational Wealth Builder for Patient Investors
Key Points
Quanta Services has averaged annual gains of 41% over the past 10 years.
It stands to benefit from the rapid spread of data centers.
It's boasting a record backlog of orders, as well.
- 10 stocks we like better than Quanta Services ›
Plenty of companies you've never heard of might make you rich, so it's well worth looking beyond the usual suspects such as Apple, Amazon.com, and Nvidia.
For example, consider Quanta Services (NYSE: PWR), which has averaged annual gains of 26% over the past 15 years and 41% over the past decade. Could it be a terrific investment for you? Let's see.
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Meet Quanta Services
With a recent market value of $111 billion, Quanta Services describes itself as "the leading specialty contractor with the largest and highly trained skilled workforce in North America, providing fully integrated solutions for the electric power, pipeline, industrial, and communications industries."
The company was created when four companies were joined in 1997. Since then, it has acquired over 200 additional companies, maintaining a decentralized structure.
Why invest in Quanta Services?
Here are some reasons why you might want to invest in Quanta Services.
A big growth driver for Quanta Services is the proliferation of data centers, which require massive amounts of electricity. According to the International Energy Agency (IEA), data centers will soon account for roughly 50% of U.S. power demand. The IEA also projects that U.S. data center electricity usage could grow by 133% by 2030. Many, if not most, power grids will have to be modernized, which is one of the things Quanta does. (Note, though, that data centers are drawing bipartisan ire, due to their massive energy use.)
The company is growing briskly, with first-quarter revenue of $7.87 billion -- up 26% year over year -- and adjusted earnings per share (EPS) up 51%. CEO Earl Austin noted: "At our Investor Day last month, we outlined a clear path to more than doubling our adjusted EPS by 2030, driven by our Compounding Model and our unique positioning at the center of converging utility, generation and large-load markets -- which we believe together represent a total addressable market of $2.4 trillion through 2030."
On top of that, the company's backlog of orders recently hit a record $48.5 billion.
Should you invest in Quanta Services now?
All that might make you think this is a no-brainer investment, but hold on. Valuation matters, and Quanta Services' shares seem overvalued at recent levels. Its recent forward-looking price-to-earnings (P/E) ratio of 55, for example, is quite a bit higher than its five-year average of 24.5.
Fast growers do warrant higher valuations, so it might not be a fatal error to buy now. But to play it safer, you might add it to your watch list and wait for a pullback in the stock, or just establish a small position in it to start.
If you're already invested in Quanta Services and have a long investing timeline, hanging on seems like a smart move. The company's future seems bright.
Should you buy stock in Quanta Services right now?
Before you buy stock in Quanta Services, consider this:
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Selena Maranjian has positions in Amazon, Apple, and Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, Nvidia, and Quanta Services. The Motley Fool has a disclosure policy.
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