00:09 Host
Welcome to good buy or goodbye. Our goal to help cut through that noise to navigate the best moves for your portfolio. I’m here with Domini Impact Investments CEO, Carol Liel, taking a look at industrials and Carol, you are bullish on Quanta Services and this is a specialty contractor in the energy and communications infrastructure space. Think AI, think data centers and not a surprise. This chart is from the lower left to the upper right, but I’m guessing you think there’s more opportunity here. So let’s get to your three reasons starting here.
00:42 Carol Leibel
Yeah, so the um secular growth that we’re seeing as you mentioned earlier, tied into AI, very energy thirsty data centers and providing that opportunity in that sweet spot that quantum services services.
01:00 Host
So, we’ve seen we’ve seen a lot of companies in this space and there’s been some questions about too much money flooding in, you know, are they overbuilding it? Is that not one of your concerns?
01:12 Carol Leibel
Um so, no, what we’re seeing is that as we need more energy, we’re also seeing that the grid is aging and we really need to modernize. Again, a specialty of quantum services. So you know, quantum able to support that reliability, the resiliency and help to bring that onshoring of factories and renewable energy.
01:38 Host
All right, well let’s get to our second, best-in-class execution. So are you like you’re liking what management is doing here with the company, I’m guessing.
01:47 Carol Leibel
We do. So we’re see they are able to really shift from these sort of competitive bid heavy contracts to long-term partnerships with the hyperscalers and the utilities, giving them that sense of stability, transparency and future earnings.
02:08 Host
So the biggest companies on Earth are giving them long-term contracts and that gives you a little bit of peace at night.
02:14 Carol Leibel
Correct, and gives them the ability to earn higher profit margins.
02:18 Host
Okay. Well, let’s get to your third reason here, solid financial metrics. So tell us about the company’s financials.
02:24 Carol Leibel
Yeah, strong balance sheet and net debt to, which is really healthy. We’re seeing that well below the two and a half times. It’s sort of that threshold that we’re looking at for a concern, giving them bandwidth for future acquisitions to help add value in the future.
02:44 Host
Okay. Well let’s get to some of the potential risks here and we’ve got a few project execution. Let’s talk about that.
02:51 Carol Leibel
Yeah, so that growth, so they Quantum has been able to build a $44 billion backlog, which is a record for them. 27% higher than their backlog last year. And um, in fact, management is predicting this year is going to be another 2026 is going to be another record year. But a lot of that growth is priced in. This is a stock that’s not cheap.
03:13 Host
Yeah, that chart was from the lower left to the upper right.
03:15 Carol Leibel
40 times earnings. so management really needs to execute on those projects in a very solid way, so as not to make investors nervous.
03:25 Host
price for perfection. That’s what I’m hearing. All right, let’s talk about mergers and acquisition and any integrations there.
03:30 Carol Leibel
Yeah, so they’re really able to add value through um, you know, that using some of that cash flow and some debt to build this is a business that’s really been built on quite a bit of uh acquisition, you know, I think they’ve done over 150 and management has done it well.
03:49 Host
Okay, well that is a lot of acquisition, but you’re liking the stock. Let’s move on to a name that you’re not really that big on. This is Walter’s Kluwer and I hope I pronounce that correctly. I’ll tell you what, I had to look this company up. I was not familiar with them. I do know how to read a chart though. that is from the upper left to the lower right. That’s kind of the mirror image of what we were seeing before. So let’s tell us uh what you don’t like about this company reasons to avoid.
04:20 Carol Leibel
Yeah, so both of these companies, both Quanta and Walters are in the industrial sector, but as you can see, two very different results. Walters Clover is in the software and information business, they provide information to legal accountants, healthcare workers, compliance and we’re a bit concerned about the AI threat here.
04:42 Host
I mean that space just blew up a few weeks ago. but this company has been on the decline for over a year.
04:47 Carol Leibel
Yeah, so software has been a bit under attack. There is a question of how AI is going to affect that software as a service model and even the per user licensing business model, if there are fewer workers or if the economics of licensing those per user seeds becomes too high, companies may choose to go at to internally build it themselves with some AI agents.
05:15 Host
We’ve heard that. Yeah, we’ve heard that. We got to move on. We’re running out of time. I’m having too much fun here. margins uncertainty, talk to us about that.
05:20 Carol Leibel
Yeah, so they’re going to need to invest in developing their products. So that’s going to take money out of the bottom line, that’s going to put pressure on the margins.
05:29 Host
Okay. Um we actually have one more here growth rate doubt doubt.
05:33 Carol Leibel
Yeah, so as I say, how many workers are in their seats, do companies decide to go it alone or the renewal rates what they were. What is the timeline for that? Is it a year? Is it three years?
05:45 Host
Okay, let’s tell us, okay, let’s say that what can the company do to kind of turn your opinion around?
05:52 Carol Leibel
Yeah, so I think if we see there, they’re really able to lock in a nice partnership with an AI platform, that would give us confidence that it’s going to be easier for a user to license from them than to go it alone.
06:06 Host
All right, that’s we we’re out of time here, but thank you for stopping by Carol.
06:10 Carol Leibel
Thanks for having me.
06:11 Host
You bet. and thank you all for watching good buy or goodbye.