IES Holdings triggered article

IES Holdings (IESC) has caught investor attention after recent share price moves, with the stock up 3% over the past week but showing a 6% decline over the past month.

The recent 1 day share price return of 2.96% and 7 day share price return of 4.83% come after a softer 30 day share price return of a 6.08% decline. At the same time, the 1 year total shareholder return of 78.41% and a very large 3 year total shareholder return suggest longer term momentum has been strong, even with short term cooling.

If the recent move in IES Holdings has you thinking about where else growth stories might be forming, it could be a good time to check out fast growing stocks with high insider ownership.

With annual revenue and net income growth both above 14%, a recent 6% 30 day pullback, and the share price sitting close to its US$440 analyst target, the key question is whether this creates a buying opportunity or if markets are already pricing in future growth.

Price-to-Earnings of 28.4x: Is it justified?

On a P/E of 28.4x at a last close of US$432.19, IES Holdings screens cheaper than the broader US Construction industry but richer than its closer peer group.

The P/E multiple compares the current share price with earnings per share, so it reflects how much investors are paying for each dollar of current earnings. For a company like IES Holdings, which operates across electrical contracting, communications infrastructure and industrial services, this is a common way for the market to frame expectations around future profitability.

Based on the data, the current 28.4x P/E sits below the estimated fair P/E of 34.4x. This implies the market is valuing those earnings at a lower level than the model suggests they could trade at. However, the same 28.4x P/E is above the peer average of 24.1x, so investors are already paying a premium compared to similar companies, and that gap would need to be supported by future earnings delivery for the higher multiple to be sustained.

Against the wider US Construction industry average of 33.3x, IES Holdings trades at a discount, which is a clear contrast to the premium against peers. If the market were to move closer to the estimated fair P/E, that would mean a higher multiple than today. If it instead settles in line with peers, the valuation would look less generous than the industry comparison suggests.

Result: Price-to-Earnings of 28.4x (ABOUT RIGHT)

However, you also have to weigh risks such as any slowdown across construction end markets or project delays that could pressure earnings relative to the current price-to-earnings (P/E) premium.

Another View: Our DCF Model Paints A Different Picture

While the P/E of 28.4x looks reasonable against the industry and fair ratio, our DCF model points the other way. At a last close of US$432.19 versus an estimated fair value of US$320.18, IES Holdings screens as overvalued using this cash flow based lens. The question is, which signal do you trust more?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out IES Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 886 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own IES Holdings Narrative

If you see the numbers differently or would rather lean on your own work, you can build a custom view in just a few minutes. Do it your way.

A great starting point for your IES Holdings research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

If IES Holdings is on your radar, do not stop there. Casting a wider net across clear themes can help you spot opportunities you might otherwise miss.

• Target reliable cash generators by scanning these 13 dividend stocks with yields > 3% that may align with your income goals.
• Lean into future facing themes by reviewing these 25 AI penny stocks tied to artificial intelligence trends.
• Seek potential mispricings by checking these 886 undervalued stocks based on cash flows that stand out on cash flow metrics.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.