The past six months have been a windfall for Comfort Systems’s shareholders. The company’s stock price has jumped 42.5%, hitting $1,881 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy FIX? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Is FIX a Good Business?
Formed through the merger of 12 companies, Comfort Systems (NYSE: FIX) provides mechanical and electrical contracting services.
1. Surging Backlog Locks In Future Sales
Investors interested in Construction and Maintenance Services companies should track backlog in addition to reported revenue. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Comfort Systems’s future revenue streams.
Comfort Systems’s backlog punched in at $14.06 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 56%. This performance was fantastic and shows the company has a robust sales pipeline because it is accumulating more orders than it can fulfill. Its growth also suggests that customers are committing to Comfort Systems for the long term, enhancing the business’s predictability. 
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Comfort Systems’s margin expanded by 15.1 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Comfort Systems’s free cash flow margin for the trailing 12 months was 19.3%.
3. New Investments Bear Fruit as ROIC Jumps
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Fortunately, Comfort Systems’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
Final Judgment
These are just a few reasons why we think Comfort Systems is one of the best industrials companies out there, and after the recent surge, the stock trades at 33.5× forward P/E (or $1,881 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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