Comfort Systems USA (FIX Quick QuoteFIX - Free Report) is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 23.25. This is notably lower than the industry average of 29.52, making the stock look attractive on a relative valuation basis. However, it is trading higher than its three-year median P/E of 21.48. FIX’s three-year P/E range spans from 13.32 to 32.52, meaning the current valuation is closer to the higher end of its historical range.

FIX’s P/E Ratio (Forward 12-Month) vs. Industry

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Despite this valuation, FIX stock has been a strong performer, gaining 56.3% in the past year. This outpaced the Zacks Building Products - Air Conditioner and Heating industry’s 31.1% growth, the broader Construction sector’s 8% gain, and even the S&P 500’s 21.4% increase.

FIX stock has also outperformed its peer group companies, AAON, Inc. (AAON Quick QuoteAAON - Free Report) and Watsco, Inc. (WSO Quick QuoteWSO - Free Report) but lagged EMCOR Group, Inc. (EME Quick QuoteEME - Free Report) . AAON, WSO and EME shares have surged 33.4%, 19.9% and 69.5%, respectively, over the past year.

Comfort Systems Stock 1-Year Share Performance

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Demand and Backlog Support Future Growth of FIX

FIX has been capitalizing on strong demand for its mechanical, electrical, and plumbing services. With a $5.7 billion backlog as of Sept. 30, 2024, up 32.4% year over year, the company is well-positioned to sustain revenue growth. The strong backlog reflects continued demand in the technology and manufacturing sectors, particularly data centers, semiconductor facilities, and industrial projects.

Additionally, FIX’s trailing 12-month return on invested capital stands at 31.35%, significantly higher than the industry average of 18.3%. This indicates efficient capital allocation and strong profitability.

Comfort Systems’ Revenue Growth and Sectoral Diversity

Comfort Systems has grown organically and through acquisitions. Industrial clients accounted for 60% of its revenues in the third quarter of 2024, with strong contributions from technology, life sciences, and battery plants. Institutional markets, including education, healthcare, and government, added stability, while service revenues grew 7% year over year and are expected to exceed $1 billion in 2024.

Management projects high single-digit to low double-digit revenue growth in 2025, with EBITDA margins remaining strong, backed by favorable market conditions. The company’s disciplined approach to project selection ensures a focus on high-margin, low-risk opportunities.

Market Trends Favor FIX’s Business Model

FIX is benefiting from structural tailwinds, including increased investments in AI-driven data centers, semiconductor manufacturing, and energy-efficient buildings. The CHIPS Act and the reshoring of U.S. manufacturing are also boosting demand for the company’s services.

In addition, FIX has been an industry leader in prefabrication, modular construction, and Building Information Modeling. These innovations enhance efficiency, reduce project timelines, and help manage skilled labor shortages—one of the key challenges facing the industry.

FIX’s Strong Financials and Shareholder Returns

Comfort Systems has consistently maintained financial discipline. Year-to-date revenue (as of third-quarter 2024) stands at $5.16 billion, with a gross profit of $1.04 billion. The company has delivered 25 consecutive years of positive free cash flow, underscoring its strong cash generation capabilities. FIX holds $415.6 million in cash with minimal debt of $68.4 million, resulting in a debt-to-EBITDA ratio of just 0.09. Additionally, an $850 million senior credit facility with no current borrowings enhances its financial flexibility.

Record cash flow in the third quarter allowed the company to increase dividends and buy back shares. FIX has raised its dividend payout for 12 consecutive years, currently paying an annual cash dividend of $1.40 per share, representing a modest payout ratio of around 9%.

FIX’s Challenges: Managing Growth and Tariff Headwinds

FIX faces the challenge of balancing its record backlog with strategic project selection. The company remains selective in taking on new projects, prioritizing profitability and operational efficiency over sheer volume. CEO Brian Lane emphasizes that the issue isn't securing work but maintaining discipline in project selection to optimize margins and execution.

Workforce management is another key focus. As demand grows, ensuring a steady supply of skilled labor while sustaining efficiency has become increasingly important. To address this, FIX has invested in automation and modular construction, particularly enhancing productivity in its Houston and North Carolina facilities.

The recently announced 25% tariffs on steel and aluminum, effective March 12, 2025, could increase FIX’s material costs. Since steel and aluminum are key components in HVAC systems and related infrastructure, FIX may face margin pressure if it cannot pass these costs onto customers.

Additionally, broader economic uncertainties stemming from potential retaliatory tariffs and supply chain disruptions could indirectly impact FIX’s operations. Investors should monitor how the company navigates these challenges, including potential cost mitigation strategies.

Technical Indicators Suggest Near-Term Volatility for Fix

FIX stock has been trading above its 200-day simple moving average (SMA) but below the 50-day SMA, signaling a potential short-term pullback. Over the past three months, the stock has even plunged 11.3%, underperforming the industry’s 9.3% dip. However, long-term fundamentals remain strong.

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Earnings Growth Outlook Remains Encouraging

Although FIX’s earnings estimate revisions have been muted over the past 60 days, analysts still expect its earnings per share (EPS) to grow 20.8% year over year in 2025. This suggests the company’s profitability trajectory remains intact despite near-term headwinds.

Analysts Are Bullish on FIX Stock

Analysts are optimistic about Comfort Systems. Out of five recommendations contributing to the company’s Average Brokerage Recommendation (ABR), four have rated the stock as a Strong Buy, leading to an impressive ABR of 1.4. Wall Street’s average price target for FIX stock is $548.00 per share, implying a potential upside of 37.6% from recent levels.

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Should You Buy, Sell, or Hold FIX Stock?

Given its solid fundamentals, robust backlog, and strong financials, Comfort Systems USA remains a compelling long-term investment. However, at a P/E of 23.25X, which is above its historical median, and with near-term risks from tariffs and workforce constraints, investors may want to wait for a better entry point.

The stock currently carries a Zacks Rank #3 (Hold), indicating a balanced risk-reward profile. Existing investors should hold FIX stock and monitor how the company navigates cost pressures and backlog execution. Long-term growth drivers remain intact, making it a stock worth keeping on the watchlist for future opportunities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.