EME Emcor
Quality contractor riding an infrastructure supercycle, now trading closer to intrinsic value than a month ago.
The story
EMCOR is a best-in-class electrical/mechanical contractor riding the data-center buildout, grid modernization, and reshoring capex cycles, with a fee-for-service model (not fixed-price EPC) that mitigates project risk. Margins have expanded from 5.2% to 10.2% over three years as the mix shifted toward higher-value, specialized electrical/network infrastructure work; that expansion is now decelerating toward a sustainable plateau rather than continuing unabated. Balance sheet is net-cash, giving it flexibility to keep self-funding growth and buybacks through the cycle.
Drivers are largely unchanged from the prior take since the core facts (backlog strength, raised 2026 guidance, decelerating but still-elevated margin expansion) confirm rather than contradict the thesis; sales-to-capital nudged to 4.6 to reflect the TTM actual of 4.83, and beta trimmed slightly toward the 1.05 industry anchor given the net-cash balance sheet.
Value drivers
| Revenue growth (Y1) | 11.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 7y |
| Target operating margin | 10.9% |
| Years to target margin | 5 |
| Sales-to-capital | 4.60 |
| Beta | 1.08 |
| Failure probability | 0.7% |
| Cost of capital (WACC) | 9.4% |
| Terminal WACC | 9.0% |
Valuation bridge
| PV of explicit FCFF | 7.74B |
| PV of terminal value | 16.68B |
| Equity value | 25.35B |
| ÷ shares → per share | $569.26 |
News
bullish +0.60 · 8 articles
- Implied Volatility Surging for EMCOR Stock Options
- EMCOR (EME) Stock Could Be 43% Undervalued Following Raised 2026 Guidance
- Quanta vs. EMCOR: Which Infrastructure Stock Is the Better Buy?
- EMCOR Group, Inc. (EME) Is a Trending Stock: Facts to Know Before Betting on It
- 1 Large-Cap Stock on Our Buy List and 2 We Turn Down
- Emcor Group (EME) Declines More Than Market: Some Information for Investors
- EMCOR Expands Into High-Growth End Markets: Can It Keep Winning Share?
- Sterling's E-Infrastructure Revenues Soar 174%: Can It Keep Winning?
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 19.70B | 11.0% | 10.4% | 1.51B | 424.39M | 1.09B | 993.70M |
| 2 | 21.60B | 9.7% | 10.5% | 1.68B | 413.97M | 1.26B | 1.06B |
| 3 | 23.40B | 8.3% | 10.6% | 1.84B | 391.37M | 1.45B | 1.11B |
| 4 | 25.04B | 7.0% | 10.8% | 1.99B | 356.15M | 1.64B | 1.14B |
| 5 | 26.46B | 5.7% | 10.9% | 2.13B | 308.49M | 1.82B | 1.16B |
| 6 | 27.61B | 4.3% | 10.9% | 2.22B | 249.27M | 1.98B | 1.15B |
| 7 | 28.44B | 3.0% | 10.9% | 2.29B | 180.05M | 2.11B | 1.13B |
Key risks
- Nonresidential construction cycle turns down if data-center/reshoring capex normalizes faster than expected
- Margin expansion has been unusually steep (5.2%→10.2% in 3 years) and could mean-revert if project mix normalizes
- Labor cost inflation and skilled-trade availability constrain execution on a growing backlog
Catalysts
- Raised 2026 guidance signals near-term visibility into backlog conversion
- Continued data center and grid electrification demand supports multi-year revenue runway