Argan vs. Comfort Systems USA: Which AI Infrastructure Stock Is the Better Buy?
Key Points
Argan builds power plants for AI data centers, while Comfort Systems USA installs critical HVAC.
Both companies have very similar financial growth rates and valuations, but Comfort Systems USA slightly edges out Argan on all of those key metrics.
Argan gets high up-front revenue from projects, but Comfort Systems USA is better positioned for recurring revenue from various facilities.
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Artificial intelligence (AI) requires many data centers to scale. Those data centers provide the infrastructure for power, chips, and other necessary inputs for this innovative technology.
However, someone has to build those AI data centers and ensure that the infrastructure can handle AI workloads. That's where Argan (NYSE: AGX) and Comfort Systems USA (NYSE: FIX) come into play. These infrastructure companies are vital to data centers, and with both down by more than 10% from their all-time highs, there's a good argument to be made for both of them.
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However, if you can put money only into Argan or Comfort Systems USA, these are some of the key details to consider.
Image source: Getty Images.
How both companies enable AI data centers
Data centers require many inputs, and this becomes more important since AI chips must be housed in data centers to function. Argan specializes in natural gas power plants and addresses the power shortage.
Data centers tap into power plants for energy, so anytime a new site is announced, utility companies and AI data center builders assess whether the power grid can support the new facility. If there is insufficient power in the area, Argan is hired to build a power plant that can generate enough energy for the upcoming data center.
Comfort Systems USA provides HVAC installation services for those data centers. Temperature control is vital in data centers because they require extremely cool environments to prevent AI chips from overheating.
Argan makes more money up front, but it's just constructing power plants. It doesn't actually own them. And Comfort Systems USA does not own the AI data centers that house its HVAC systems, but those same installations still require maintenance, so Comfort Systems USA has more potential for recurring revenue from the projects it is involved in.
Comfort Systems USA has a slight edge with valuation and growth rates
Both stocks have had similar movement in recent years. Both have more than tripled over the past year, and even their revenue growth rates and valuations are similar. However, Comfort Systems USA barely wins out on both of those key metrics.
Argan delivered 50% year-over-year revenue growth in its fiscal 2027 first quarter, compared to Comfort Systems USA's 56% year-over-year revenue growth in Q1. Comfort Fix Systems USA also reported higher year-over-year net income growth, although Argan's 15.8% net profit margin edged out Comfort Systems USA's 12.9% net profit margin. Both companies more than doubled their profits year over year.
Comfort Systems USA trades at a 51 price-to-earnings (P/E) ratio, compared to Argan's 60 P/E ratio. That means Comfort Systems USA offers a higher margin of safety than Argan. Valuation matters considerably, as both of these companies have similar growth rates across key metrics.
Recurring revenue gives Comfort Systems USA a base
While AI continues to heat up and looks like it could continue to scale for many years, it's worth considering how these companies are positioned if this industry starts to slow down. Comfort Systems USA is better positioned in that regard, as existing AI data centers still need maintenance. Argan doesn't generate any extra revenue from a project after its completion.
Argan cited global energy demand and aging power-generating infrastructure as two key catalysts. The company has been executing on the opportunity and closed out its fiscal 2027 first quarter with a $2.8 billion backlog. Argan reported $291 million in revenue during its most recent quarter, so its backlog could keep the company busy for multiple years.
However, after completing projects, Argan must start constructing the next power plant to realize more revenue. Meanwhile, Comfort Systems USA can view each data center as recurring income. That part of the business should become more lucrative as more data centers are completed.
Comfort Systems USA wrapped up the quarter with a $12.45 billion backlog, compared to $2.87 billion in Q1 revenue. That backlog also offers revenue visibility for an extended period of time.
Although both companies are well positioned for now, Comfort Systems USA looks like the better pick if you could only choose one.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA. The Motley Fool has a disclosure policy.
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