Technology company Trimble (TRMB -1.08%) has a long pathway of growth ahead. The interesting thing about its growth drivers is that they come from a diverse set of sources -- from end-market improvements, through the growth of new technologies that add value to Trimble's solutions, and a shift toward higher-margin activities. As a result, there's a lot to like about the company's stock. Here's why.

Introducing Trimble

Trimble is a leading company in the positioning, modeling, and data analytics arena. In plain English, this means Trimble uses positioning technology to connect a customer's physical assets and activity with the digital world. As you might imagine, the company has a historical strength in the geospatial markets (mapping, surveying, etc.). In addition, the transportation market (real-time monitoring of fleets and connected vehicles) is another important end market.

Precision agriculture in action.

Image source: Getty Images.

Within the resources and utilities segment, Trimble is a leading player in the precision agriculture market -- one of the hottest growth sectors of 2021. Through precision technology and data analytics, farmers can better manage planting, spraying, and harvesting. In addition, governments, utilities, and forestry owners use Trimble to make better decisions and monitor and manage their assets.

However, Trimble's major segment is buildings and infrastructure. Within construction, Trimble provides real-time information from the initial design, the building, and ultimately the operating of the asset. As such, it's a key technology in helping asset owners reduce waste and reduce carbon emissions. Similarly, Trimble's digital technology can help design infrastructure, build it, and operate it more efficiently.

End-market drivers

Two of the key growth opportunities can be intuitively grasped from the introduction above. First, Trimble is a key beneficiary of the infrastructure bill. Speaking on the company's third-quarter earnings call, CEO Robert Painter said Trimble could aid the "increase [in] the competitiveness of the infrastructure in the United States" by helping "deliver that infrastructure 20%, 30% cheaper through the use of technology."

A space truss construction.

Image source: Getty Images.

The second exciting end-market driver could come as the buildings and construction industries reduce carbon emissions. Buildings are responsible for 40% of global greenhouse emissions, and Trimble cites research claiming that 39% of global carbon emissions come from the building and construction industry. Trimble's solutions can help reduce waste (by ensuring projects closely follow designed models) and lower carbon emissions through better design and operation. As such, the company is a component in the drive to net-zero carbon buildings.

New technologies, new applications

The company has come a long way from its routes in global positioning systems (GPS). It is now positioned to increasingly become what management calls part of its customers' "integrated work process." In other words, Trimble's solutions will be an integrated part of its customers' daily activities and help to make them more productive.

An example of this comes from real-time monitoring of trucking fleets, whereby the safety and efficacy of routes are maximized by using data gathered and analyzed in real time. The precision agriculture industry is another example, as is the operating of an industrial facility.

Furthermore, Trimble's hardware and software applications will only increase in scope and value with the explosion of data and analytical capability created by the digital revolution.

A keyboard with a profit button on it.

Image source: Getty Images.

Internal margin improvement

Finally, there's a margin expansion opportunity through the increasing share of revenue coming from higher-margin software. Trimble embeds software in its hardware solutions, but the most exciting opportunity probably comes from an application software that links real-time operational data with analytics capability and back-office operations.

As the proliferation of digital technology increases and Trimble becomes part of an "integrated work process" of its customers, its application software will likely become increasingly relevant.

Looking ahead

Trading on 30 times its estimated free cash flow in 2021, Trimble is priced like a growth stock. Still, that growth looks assured. For example, Wall Street analysts estimate Trimble's revenue will grow at a 9% annual rate for the next couple of years, and operating income growing at an 11% rate aided by profit margin expansion. Given the excellent long-term growth prospects, Trimble is highly likely to grow into its valuation over time, rewarding investors along the way.