Please ensure Javascript is enabled for purposes of website accessibility

This Under-the-Radar Stock Has a Solution for California Wildfires

By Donald Diaz - Updated Jan 30, 2020 at 5:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Could this little-known Florida-based company have the answer to California’s fires?

Engineering consulting firm NV5 Global (NVEE 0.60%) may have a viable solution to California's deadly and costly wildfires. Traditional above-ground power transmission lines were the culprit behind the state's deadliest fire ever, the 2018 Camp Fire. The blaze destroyed nearly 19,000 homes and was responsible for 86 deaths. Sparks from bankrupt PG&E's exposed electrical lines, the result of poor maintenance, have caused over 1,500 fires in the past six years in the burn-plagued state. 

Clearly a solution is desperately needed. The Camp Fire was 2018's costliest natural disaster globally, causing $16.5 billion in damage. NV5's innovations may prove to be the best way to prevent these deadly wildfires.

Power lines on a flat landscape

Image source: Getty Images.

Doing better underground 

NV5 will work with California municipalities to mitigate fire risks via its underground power line technology. The firm sources its platform entirely in-house and is thereby more cost-effective over the life of a project than other companies that outsource their power solutions. Additionally, as a result of the NV5's long-standing relationship with the state as the original purveyor of grid layouts in several areas, it completes mapping and planning for "hardscaping," or undergrounding, more efficiently. NV5 hopes to provide the state with more reliable and safer power transmission solutions. This will enable power providers to maintain electrical service despite windy conditions that normally require interruption as a preventative method during the ever-lengthening fire season in the beleaguered state.

Undergrounding, which was first pioneered in the early 1800s, has proven to be a safer and more effective method of electrical transit. The up-front costs are higher, but undergrounding may actually provide more long-term savings to state and local governments as well as end users. A lower risk of fire and a much-reduced susceptibility to inclement weather are among the benefits of NV5's technological designs, which it is able to provide at lower costs than other companies in the space. 

As a result, NV5 recently won a $20 million contract to engineer and design underground electrical transmission, which it expects to complete in 2021. NV5 expects its presence in California to continue and lead to further business opportunities that will boost its bottom line. The company's Energy 2021 initiative, which includes this contract within its most profitable energy division, is expected to generate $250 million in revenue by next year. 

More good news  

This is not NV5's only initiative with respect to climate change, as evidenced by its recent acquisition of Quantum Spatial. 

Quantum Spatial has been awarded an $18.8 million contract by the National Oceanic and Atmospheric Administration (NOAA) to perform shoreline mapping services in two coastal U.S. regions and two other international locations. The firm's industry-leading topobathy LiDar technology was the main catalyst that moved NOAA to award NV5 its government IDIQ (indefinite delivery indefinite quantity) contract.

This technology maps coastlines in storm-inundated areas, providing cutting-edge data relevant to rising sea levels. This will continue to provide NV5 with ongoing revenue beyond the current contract, which the NV5 expects to grow to at least $100 million in the next fiscal year. 

NVEE Chart

NVEE data by YCharts.

Favorable future growth

As a result of NV5's growing portfolio of new projects and acquisitions, current total revenue of $491 million is expected to grow to $700 million by 2021. This would equal the firm's current market capitalization. Given the firm's initiatives, along with its long-term trend of impressive growth in net income and total revenue ($16 million and $267 million, respectively, since 2016), investors may do well to consider NV5 more seriously.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NV5 Global Stock Quote
NV5 Global
NVEE
$112.79 (0.60%) $0.67
PG&E Corporation Stock Quote
PG&E Corporation
PCG
$11.79 (0.60%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.