Meet the Newest Addition to the S&P 500. The Stock Has Soared 200% Since Early Last Year, and Is Still a Buy Right Now, According to 1 Wall Street Analyst.

One of the newest additions to the S&P 500 (SNPINDEX: ^GSPC) soared long before joining the index, but this could just be the beginning of a long bull run.

Emcor Group (NYSE: EME) joined the S&P 500 index in September. The stock has been an unstoppable multibagger, soaring 200% since the beginning of 2024 and more than quadrupling investors' money in just three years.

Several analysts still have a buy rating on Emcor. One of them is Brent Thielman from DA Davidson. The analyst lifted Emcor stock's price target from $725 to $800 per share right after Emcor's third-quarter earnings release on Oct. 30.

Thielman's new price target represents a potential 23% upside from Emcor stock's price of around $650 per share, as of this writing. While DA Davidson's stock price targets look 12-18 months out, Emcor's growth story should extend well beyond that amid the data center boom that's driving the company's contract value and revenues to record highs.

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What does Emcor do?

Emcor is a specialty contractor providing a wide variety of critical infrastructure services such as mechanical, electrical, heating, lighting, air conditioning, power generation, security, and fire protection. The company provides end-to-end solutions, from construction to operation and maintenance.

Emcor's diversity across sectors, from manufacturing and industrials to healthcare, transportation, and network and communications (data centers), has provided ample growth opportunities over the years. One of the most powerful new growth engines for Emcor today comes from artificial intelligence (AI) data centers and semiconductor manufacturing.

What's driving growth at Emcor?

As a contractor, Emcor recognizes revenue as and when project milestones are achieved. Remaining performance obligations (RPOs) reflect the unfulfilled part of ongoing contracts and are, therefore, a crucial indicator of its demand and future revenue.

Emcor's RPOs soared 29% year over year to a record $12.6 billion in the third quarter. During its third-quarter earnings call, management revealed one big number: More than 50% of Emcor's RPO growth in Q3 came from network and communications, driven by data centers. In numbers, RPOs from network and communications almost doubled year over year to an all-time high of $4.3 billion.

As RPOs rise, so should Emcor's revenues. The company is already breaking records, with both revenue and earnings per share setting record highs in Q3. While Emcor's top line got a big boost from Miller Electric, acquired earlier this year, it also posted a healthy 8% growth in organic revenue during the quarter.

The all-cash $867 million Miller Electric acquisition has significantly expanded Emcor's footprint in Florida. Moreover, 47% of Miller Electric's revenue in 2024 came from data centers and healthcare, both of which are also among the largest markets for Emcor.

Emcor's management is clear about one thing: AI, data centers, and cloud storage will become a more integral part of the company's portfolio going forward, and that should drive margins and cash flows.

Emcor is a no-brainer stock to buy on every dip

As one of the largest specialty contractors in the U.S., Emcor is exceptionally well positioned to capitalize on the booming AI data center market, as well as other megatrends such as reshoring, high-tech manufacturing (semiconductors, life sciences, biotech), and renewable energy. While these are key growth drivers for the company, a mix of contractual and recurring revenue by design of its business model hugely helps shield Emcor from economic down cycles.

For now, Emcor is all set to deliver yet another record year, with management projecting nearly 15% growth in revenue in 2025. Its record RPOs already provide solid visibility into 2026. To top that, Emcor also pays a dividend and regularly buys back shares.

With consensus projecting Emcor's earnings to grow by double-digit percentages in 2026, this newest S&P 500 stock is a buy on every dip for anyone who is bullish about AI and data centers.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends EMCOR Group. The Motley Fool has a disclosure policy.