NV5 Global (NVEE)

Infrastructure consulting firm NV5 Global (NASDAQ:NVEE) announced better-than-expected revenue in Q1 CY2025, with sales up 10.1% year on year to $234 million. The company’s full-year revenue guidance of $1.04 billion at the midpoint came in 1% above analysts’ estimates. Its non-GAAP profit of $0.17 per share was 8.9% below analysts’ consensus estimates.

Company Overview

Operating from over 100 locations across the U.S. and internationally, NV5 Global (NASDAQ:NVEE) provides engineering, environmental, geospatial, and technical consulting services to public and private sector clients for infrastructure and building projects.

The sector has historically benefitted from steady government spending on defense, infrastructure, and regulatory compliance, providing firms long-term contract stability. However, the Trump administration is showing more willingness than previous administrations to upend government spending and bloat. Whether or not defense budgets get cut, the rising demand for cybersecurity, AI-driven defense solutions, and sustainability consulting should benefit the sector for years, as agencies and enterprises seek expertise in navigating complex technology and regulations. Additionally, industrial automation and digital engineering are driving efficiency gains in infrastructure and technical consulting projects, which could help profit margins.

NV5 Global competes with larger engineering and consulting firms such as AECOM (NYSE: ACM), Jacobs Solutions (NYSE: J), and Tetra Tech (NASDAQ: TTEK), as well as with specialized firms like Stantec (NYSE: STN) and WSP Global (TSX: WSP).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $962.8 million in revenue over the past 12 months, NV5 Global is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, NV5 Global grew its sales at an impressive 10% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. NV5 Global’s annualized revenue growth of 11% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, NV5 Global reported year-on-year revenue growth of 10.1%, and its $234 million of revenue exceeded Wall Street’s estimates by 2.4%.

Looking ahead, sell-side analysts expect revenue to grow 7.6% over the next 12 months, a deceleration versus the last two years. Still, this projection is noteworthy and implies the market is forecasting success for its products and services.

NV5 Global was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.9% was weak for a business services business.

Analyzing the trend in its profitability, NV5 Global’s operating margin decreased by 2.5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. NV5 Global’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, NV5 Global generated an operating profit margin of 1.9%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

NV5 Global’s EPS grew at a decent 7.7% compounded annual growth rate over the last five years. However, this performance was lower than its 10% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Diving into NV5 Global’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, NV5 Global’s operating margin was flat this quarter but declined by 2.5 percentage points over the last five years. Its share count also grew by 25.6%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q1, NV5 Global reported EPS at $0.17, in line with the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects NV5 Global’s full-year EPS of $1.18 to grow 12.7%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

NV5 Global has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 8.9% over the last five years, better than the broader business services sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Taking a step back, we can see that NV5 Global’s margin dropped by 13.7 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

NV5 Global’s free cash flow clocked in at $27.34 million in Q1, equivalent to a 11.7% margin. This result was good as its margin was 4.2 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

NV5 Global historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.2%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, NV5 Global’s ROIC averaged 2 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

NV5 Global reported $53.21 million of cash and $233.3 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $149.1 million of EBITDA over the last 12 months, we view NV5 Global’s 1.2× net-debt-to-EBITDA ratio as safe. We also see its $9.45 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see NV5 Global beat analysts’ revenue expectations this quarter. We were also happy its full-year EPS guidance outperformed Wall Street’s estimates. On the other hand, its EPS missed significantly. Overall, this was a mixed quarter. The stock remained flat at $18.43 immediately following the results.

Updated: May 17, 2025 at 12:01 AM EDT

Are you wondering whether to buy NV5 Global or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

NV5 Global isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its declining adjusted operating margin shows the business has become less efficient. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its cash profitability fell over the last five years.

NV5 Global’s P/E ratio based on the next 12 months is 16.6x. Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $25.74 on the company (compared to the current share price of $21.92).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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