It's been a rough year for shareholders of some of Ohio's top companies. Shares of consumer goods giant Procter & Gamble are down nearly 10% for the year, while tire maker Goodyear's stock is down more than 20%.
Meanwhile, the stock of one Ohio-based company is not only up more than 50% so far this year, but has skyrocketed more than 850% over the last five years.
NYSE: VRT
Key Data Points
Is it too late to buy shares of Ohio superstar Vertiv Holdings (VRT +1.56%)? Here's what investors need to know.
What Vertiv does
Headquartered in Columbus, Vertiv designs, manufactures, and services digital infrastructure for data centers, communication networks, and commercial and industrial facilities. Its primary products include power supply systems, cooling systems, and server racks for data centers. It also provides service and maintenance of those systems and components. With about 31,000 employees in 40 countries, Vertiv supplies customers in a variety of industries, including cloud services, financial services, manufacturing, energy, and more.
Vertiv's most crucial customers are so-called "hyperscalers." These companies operate immense global networks of data centers and provide large-scale cloud computing or data storage, and management to their customers. They include companies like Amazon's (AMZN +1.41%) Amazon Web Services (AWS), Oracle, and Microsoft Azure.
Because the hyperscalers are committing so much of their focus to artificial intelligence (AI) -- which has notoriously high usage rates for both data and computing power -- data centers are in high demand. However, the data centers don't just consist of high-powered microchips from Nvidia (NVDA +2.26%) and network hardware from Arista Networks (ANET +1.02%). They require specialty power supply systems and massive cooling systems to prevent the servers from overheating. That's where Vertiv comes in.
Image source: Getty Images.
A big-name partner
As a specialist in data center power and cooling systems, Vertiv has become a go-to designer for such systems for major industry players. In fact, Vertiv has announced several important partnerships to develop the next generation of data center technology.
When it comes to data center processing power, there's really only one name that matters: Nvidia. Because Nvidia is the undisputed leading manufacturer of top-of-the-line microprocessors for AI applications, the entire data center industry's hardware is configured to Nvidia's specifications. That's why it's a major win for Vertiv to have been chosen to collaborate with Nvidia to redesign data center power architecture for the next generation of efficiency and computing power.
Current data centers are largely reliant on 54 VDC power distribution systems, which are limited to power levels below 200 kilowatts. However, next-generation computing requires megawatt-scale (1,000-kilowatt) power. The new 800 VDC systems being jointly developed by Nvidia and Vertiv feature increased voltage to enable much higher power capacity.
These new systems, which aren't expected to be deployed until 2027, should help Vertiv's backlog -- contracted orders that it hasn't yet fulfilled -- continue to grow. The company's backlog has already grown 55% in the last 18 months, from $5.5 billion at the end of 2023 to $8.5 billion in its most recent quarter.
Is it too late to buy?
Vertiv's growth has been very strong recently, with net sales up 35% year over year in the most recent quarter, operating profit up 32%, and per-share earnings up 42%. But the company's stock price has grown even faster, up 55% in the past year, and 850% in the last five years. It's reasonable to ask whether the stock has gotten too expensive to buy.
Well, it's certainly more expensive than it was in 2023, but the projected growth isn't expected to dry up anytime soon. The company currently trades at a trailing price-to-earnings (P/E) ratio of 83.6, which is very expensive. But thanks to its strong growth projections, its forward P/E ratio -- which measures against expected earnings -- is just 45.6. That's roughly the midpoint of Nvidia's 40.2 and Arista Networks' 52.
In other words, if you think the AI-powered data center boom will keep booming over the long term -- and there's a lot of evidence suggesting it will -- Vertiv looks fairly valued. Plus, its prospects look rosy compared to many other Ohio companies. For investors bullish on tech, Vertiv is an Ohio company that seems worthy of investment.
