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AECOM Stock Trades at a Discount: Should Investors Buy It Yet?
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Key Takeaways
ACM trades at 19.96X forward P/E, below the industry's 20.17X.
Q2 Americas NSR rose 6%, driven by demand across the U.S. and Canadian design markets.
Backlog reached $24.27B in Q2, with 54.9% contracted growth and 80% enterprise win rate.
AECOM’s (ACM - Free Report) current valuation looks promising for investors. The stock is currently trading at a discount compared with the Zacks Engineering - R and D Services industry peers. The company’s forward 12-month price-to-earnings (P/E) ratio is 19.96X, which is down from the industry average of 20.17X and the S&P 500 index’s valuation of 21.83X.
AECOM is also trading currently at a discount compared with similar players VSE Corporation (VSEC - Free Report) , Quanta Services, Inc. (PWR - Free Report) and Sterling Infrastructure, Inc. (STRL - Free Report) . VSEC, Quanta Services and Sterling Infrastructure are trading with forward 12-month P/E multiples of 33.36X, 32.82X and 22.02X, respectively.
AECOM Trades at a Discount to the Industry Average
Image Source: Zacks Investment Research
AECOM's YTD Price Performance
Image Source: Zacks Investment Research
So far this year, shares of AECOM have gained 3.6% compared with the industry and the S&P 500’s increase of 2% and 0.4%, respectively. The ACM stock has also outperformed the broader Construction sector's decline of 2.7% during the same period. The company is benefiting from a strong backlog and steady net service revenue growth. A consistent focus on high-margin markets continues to support performance. With the $1.2-trillion IIJA funding accelerating in the United States and the U.K. government prioritizing investments in infrastructure, the company’s growth prospects seem encouraging.
Let us review the key factors supporting the company’s discounted valuation and growth potential.
Infrastructure Investments Driving Growth: The company remains well-positioned to capitalize on sustained infrastructure momentum. Ongoing investments in transportation, energy and environmental systems are driving activity across core markets. In the second quarter of fiscal 2025, the company reported a 6% year-over-year increase in NSR in the Americas, supported by demand across the United States and Canada’s design markets. The upside was driven by long-term trends and strong public funding, including support from federal and provincial programs. The company expects further expansion in critical federal programs in the near term.
Furthermore, global urbanization is increasing the need for infrastructure upgrades in key regions. The company is engaged in large-scale projects in the United Kingdom and Australia focused on transmission and energy systems. Rising demand for electrification and energy efficiency, along with support for digital infrastructure, is creating new opportunities in grid and storage development.
Solid NSR Growth: The company is seeing steady growth in net service revenues across its core markets. During the first six months of fiscal 2025, NSR grew 4% on an adjusted basis, indicating solid organic growth. Strong demand in transportation, water and environmental segments supports ongoing revenue expansion.
The company aims to maintain this growth while improving operating margins and cash flow over the long term. For the long term, AECOM aims to achieve 5-8% organic NSR growth annually, with a minimum of 20-30 basis points of adjusted operating margin expansion.
Strong Backlog: AECOM has been witnessing robust prospects in each of its segments. Currently, it has a good visibility of a strong backlog and pipelines for the upcoming quarters. Owing to the improving global scenario, which is fostering infrastructural demand, there has been an increase in demand for ACM’s services. This improving trend is reflected in the company’s backlog levels.
At the end of the second quarter of fiscal 2025, the total backlog was $24.27 billion, up from $23.74 billion in the prior-year period. The current backlog level includes 54.9% contracted backlog growth. AECOM’s ability to consistently secure large, complex projects underpins its competitive advantage. In the fiscal second quarter, the company achieved an 80% win rate on major enterprise pursuits and maintained a more than 50% overall win rate.
Technical indicators suggest continued strong performance for AECOM. From the graphical representation given below, it can be observed that ACM stock is trading above both 50 and 200-day simple moving averages, signaling a bullish trend. The technical strength underscores positive market sentiment and confidence in its financial health and prospects.
Earnings Estimate Trend Favors ACM Stock
Image Source: Zacks Investment Research
The favorable market fundamentals are likely to have led to bullish analysts’ sentiments, resulting in an upward revision in ACM’s fiscal 2025 earnings estimates in the past 30 days. The fiscal 2025 earnings per share estimates have moved up 2% to $5.15, indicating 13.9% year-over-year growth. Moreover, earnings estimates for 2026 have moved up during the same time frame by 2%, reflecting 11.2% year-over-year growth.
How to Play ACM Stock?
AECOM is well-positioned to benefit from strong demand in high-growth markets, especially for comprehensive design, program management and advisory services. By leveraging these trends, the company plans to continue making strategic investments to support long-term growth. With a solid backlog, consistent net service revenue growth and favorable industry conditions, AECOM’s prospects remain positive. Thus, considering these strong fundamentals along with technical indicators, this Zacks Rank #2 (Buy) stock is a suitable addition to a portfolio at this time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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AECOM Stock Trades at a Discount: Should Investors Buy It Yet?
Key Takeaways
AECOM’s (ACM - Free Report) current valuation looks promising for investors. The stock is currently trading at a discount compared with the Zacks Engineering - R and D Services industry peers. The company’s forward 12-month price-to-earnings (P/E) ratio is 19.96X, which is down from the industry average of 20.17X and the S&P 500 index’s valuation of 21.83X.
AECOM is also trading currently at a discount compared with similar players VSE Corporation (VSEC - Free Report) , Quanta Services, Inc. (PWR - Free Report) and Sterling Infrastructure, Inc. (STRL - Free Report) . VSEC, Quanta Services and Sterling Infrastructure are trading with forward 12-month P/E multiples of 33.36X, 32.82X and 22.02X, respectively.
AECOM Trades at a Discount to the Industry Average
Image Source: Zacks Investment Research
AECOM's YTD Price Performance
Image Source: Zacks Investment Research
So far this year, shares of AECOM have gained 3.6% compared with the industry and the S&P 500’s increase of 2% and 0.4%, respectively. The ACM stock has also outperformed the broader Construction sector's decline of 2.7% during the same period. The company is benefiting from a strong backlog and steady net service revenue growth. A consistent focus on high-margin markets continues to support performance. With the $1.2-trillion IIJA funding accelerating in the United States and the U.K. government prioritizing investments in infrastructure, the company’s growth prospects seem encouraging.
Let us review the key factors supporting the company’s discounted valuation and growth potential.
Infrastructure Investments Driving Growth: The company remains well-positioned to capitalize on sustained infrastructure momentum. Ongoing investments in transportation, energy and environmental systems are driving activity across core markets. In the second quarter of fiscal 2025, the company reported a 6% year-over-year increase in NSR in the Americas, supported by demand across the United States and Canada’s design markets. The upside was driven by long-term trends and strong public funding, including support from federal and provincial programs. The company expects further expansion in critical federal programs in the near term.
Furthermore, global urbanization is increasing the need for infrastructure upgrades in key regions. The company is engaged in large-scale projects in the United Kingdom and Australia focused on transmission and energy systems. Rising demand for electrification and energy efficiency, along with support for digital infrastructure, is creating new opportunities in grid and storage development.
Solid NSR Growth: The company is seeing steady growth in net service revenues across its core markets. During the first six months of fiscal 2025, NSR grew 4% on an adjusted basis, indicating solid organic growth. Strong demand in transportation, water and environmental segments supports ongoing revenue expansion.
The company aims to maintain this growth while improving operating margins and cash flow over the long term. For the long term, AECOM aims to achieve 5-8% organic NSR growth annually, with a minimum of 20-30 basis points of adjusted operating margin expansion.
Strong Backlog: AECOM has been witnessing robust prospects in each of its segments. Currently, it has a good visibility of a strong backlog and pipelines for the upcoming quarters. Owing to the improving global scenario, which is fostering infrastructural demand, there has been an increase in demand for ACM’s services. This improving trend is reflected in the company’s backlog levels.
At the end of the second quarter of fiscal 2025, the total backlog was $24.27 billion, up from $23.74 billion in the prior-year period. The current backlog level includes 54.9% contracted backlog growth. AECOM’s ability to consistently secure large, complex projects underpins its competitive advantage. In the fiscal second quarter, the company achieved an 80% win rate on major enterprise pursuits and maintained a more than 50% overall win rate.
ACM Stock Trades Above 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
Technical indicators suggest continued strong performance for AECOM. From the graphical representation given below, it can be observed that ACM stock is trading above both 50 and 200-day simple moving averages, signaling a bullish trend. The technical strength underscores positive market sentiment and confidence in its financial health and prospects.
Earnings Estimate Trend Favors ACM Stock
Image Source: Zacks Investment Research
The favorable market fundamentals are likely to have led to bullish analysts’ sentiments, resulting in an upward revision in ACM’s fiscal 2025 earnings estimates in the past 30 days. The fiscal 2025 earnings per share estimates have moved up 2% to $5.15, indicating 13.9% year-over-year growth. Moreover, earnings estimates for 2026 have moved up during the same time frame by 2%, reflecting 11.2% year-over-year growth.
How to Play ACM Stock?
AECOM is well-positioned to benefit from strong demand in high-growth markets, especially for comprehensive design, program management and advisory services. By leveraging these trends, the company plans to continue making strategic investments to support long-term growth. With a solid backlog, consistent net service revenue growth and favorable industry conditions, AECOM’s prospects remain positive. Thus, considering these strong fundamentals along with technical indicators, this Zacks Rank #2 (Buy) stock is a suitable addition to a portfolio at this time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.