FirstService is hitting new highs thanks to strong demand for its residential services and recurring contracts. We still like its long-term outlook due to its strong brands and high share of niche markets.
In the meantime, it retains a strong balance sheet while both revenues and earnings rose in the most recent quarter.
The stock trades at 24.3 times the company’s 2023 earnings forecast.
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FIRSTSERVICE CORP. (Toronto symbol FSV; www.firstservice.com) has two main businesses that each supply about half of its revenue: FirstService Residential provides property management services such as collecting monthly condominium fees and maintenance services; and FirstService Brands offers a wide variety of property management services through several franchised businesses, including Paul Davis Restoration and CertaPro Painters.
FirstService Residential provides property management services, such as collecting monthly condominium maintenance fees, preparing financial statements, on-site security and property cleaning/maintenance services; and FirstService Brands offers a wide variety of property management services through several franchised businesses, including Paul Davis Restoration, CertaPro Painters, California Closets, Post Home Inspectors, Floor Coverings International and College Pro Painters.
FirstService operates in a highly fragmented industry, so it tends to fuel its growth with acquisitions. It cuts the risk of this strategy by focusing on smaller businesses that expand its market share and geographic reach.
Under that strategy, FirstService recently paid an undisclosed sum for three small acquisitions. They include Case Restoration Co. of Nashville, Tennessee, which provides emergency property restoration services. The company’s Paul Davis Restoration business also purchased its franchised operations in Richmond, Virginia, and Reno, Nevada.
Growth Stocks: Revenues and earnings both rise strongly for FirstService
Revenue in the three months ended June 30, 2023, rose 20.3%, to $1.12 billion from $930.7 million a year earlier (all amounts except share price and market cap in U.S. dollars). Even if you factor out acquisitions, revenue improved 15%. That’s due to new contract wins and severe weather events, which spurred demand for its restoration services. The higher revenue also lifted its earnings per share by 30.4%, to $1.46 from $1.12.
FirstService ended the quarter with cash of $154.7 million, while its long-term debt of $783.2 million is a low 11% of its market cap.
The company will probably earn $6.45 a share for all of 2023. The stock trades at an acceptable 24.3 times that forecast. The $0.90 dividend yields 0.6%.
Recommendation in The Successful Investor: FirstService Corp. is a buy.