We initiate coverage on FIX with a Hold rating and a $461 PT. Comfort Systems USA is a leading national provider of mechanical, electrical, and plumbing (MEP) services to the U.S. commercial, industrial, and institutional markets.
Our thesis is founded on a paradox: FIX’s operational momentum is terrific – our FY25E/FY26E EBITDA of $1.04/1.12bn implies 23.9%/7.7% y/y growth—significantly above The street—and gross margins expand to 22% on high-value backlog and a mix shift to modular and data centers. However, the stock’s valuation is fully discounting most of this upside.
FIX trades at 18.6x forward EV/EBITDA, a steep premium to both historical median (11.0x) and peer (13.3x) multiples, and we expect macro-driven multiple contraction as elevated rates persist and non-data center construction/the broader pipeline softens even as fundamentals outperform.
We set our PT on a prudent 14.5x FY26E EV/EBITDA to balance exceptional execution with late-cycle valuation risk.
The question: Can FIX’s superior margin trajectory offset rising rate headwinds and normalize its premium?
Our stance: near-term execution is above The street, but R/R is balanced as macro/multiple risks cap further upside. We see downside risk in any deterioration in demand or an acceleration of multiple compression.
The bottom line: FIX is an operational standout, but we believe valuation now fully reflects both upside and risk – Hold.
Valuation risk: FIX's higher multiple increases macro sensitivity.
Topline Upside & Mix-Driven Margin Expansion: Sustained expansion in Comfort Systems USA’s gross margins (22.0% vs. 19.3% LY) highlights execution & project mix as standout strengths—as does record backlog exiting the latest quarter ($6.9bn, +15% sequentially and +17% y/y, with broad-based end markets contributions).