IES Holdings (IESC) is back in focus after its latest quarterly earnings report, which highlighted revenue of about US$3.49b and net income of roughly US$339m, alongside continued strength in commercial, industrial, and data center projects.

Despite a 3.3% one day share price decline to about US$500.85, IES Holdings has seen its share price return of 8.9% over 30 days and 35.5% over 90 days, alongside a very large multi year total shareholder return. This points to momentum that investors are weighing against the recent earnings update.

If you are looking beyond IES Holdings and want to see what else is moving in infrastructure and power related names, our 24 power grid technology and infrastructure stocks is a useful place to start your search.

With the share price up strongly over the past year and the stock now trading above the average analyst price target, it is fair to ask: is IES Holdings still underappreciated, or are markets already pricing in much of its future growth?

Price to earnings of 29.4x: Is it justified?

On a P/E of 29.4x, IES Holdings trades at a level that screens as good value relative to both its own fair ratio estimate of 37.9x and peer benchmarks, despite the recent share price strength around $500.85.

The P/E ratio compares what investors are currently paying for each dollar of earnings, and it is a common way to look at companies like IES Holdings that generate consistent profits. In this case, the current P/E sits below the Construction industry average of 35x and below the peer group average of 33.7x, even though the business has grown earnings by 54.8% over the past year and by 44.2% per year over the past 5 years.

That gap is even clearer when you compare the current 29.4x P/E to the estimated fair P/E of 37.9x. The market could move towards that level if current earnings strength and a 15.03% forecast annual earnings growth profile stay on track. Against an industry that returned 85.7% over the past year and a broader US market return of 10.9%, IES Holdings has already outperformed, yet its P/E still sits at a discount to both the industry average and the fair ratio estimate.

Result: Price-to-earnings of 29.4x (UNDERVALUED)

However, you also have to weigh risks such as a pullback from today’s price above the US$458 analyst target, as well as any slowdown across key construction and data center markets.

Another angle: the SWS DCF model looks less comfortable

While the P/E points to IES Holdings as good value, our DCF model tells a different story. On that view, the shares at $500.85 sit well above an estimated future cash flow value of $239, which suggests less of a safety buffer if expectations change. So which signal do you put more weight on?

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 56 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With mixed signals across valuation methods, it is worth looking past the headlines and testing the numbers yourself to see which story you agree with. If you want a clearer picture before you decide what to do next, take a closer look at the balance of 4 key rewards and 2 important warning signs.

Looking for more investment ideas?

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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.