The U.S. has underinvested in its supply chain for the past two decades. More than 7% of our bridges are considered “structurally deficient.”

There’s a water main break every two minutes, translating to an estimated loss of 6 billion gallons of treated water every day.

Corporate America is facing similar problems. Companies spent much of the past 15 years moving infrastructure overseas. They haven’t paid much mind to what’s left on our shores.

In 2001, corporate assets were roughly 41% depreciated, meaning they were worth about 60% of their original value. Since then, assets have gotten older and their net value has continued to fall.

That depreciation figure sits at 54% today. Said another way, corporate assets are at their oldest level in more than 20 years.

For years, American corporations were able to get away with this thanks to “just in time” practices.

Companies only held enough materials to meet current demand and would make products right when they were needed.

This strategy worked well—until materials stopped arriving on time in 2020.

The pandemic brought the flow of goods grinding to a halt and exposed the need for companies to invest in the resiliency of their supply chains.

It will take well over $500 billion to bring asset values back to 2001 levels. And someone has to make sure all those roads, bridges, and factories are upgraded correctly.

This is where NV5 (NVEE) comes in…

NV5 is an engineering and infrastructure consultant for the government and the private sector.

Most of its revenue comes from government agencies. NV5 has worked on everything from renovating airports and building high-speed rail lines to assisting with military logistics.

The company also works with utilities like National Grid (NGG) to optimize power distribution.

NV5 touches all parts of a project’s life cycle, which is a great position to be in because the “supply-chain supercycle” is just kicking off.

The company operates out of three business segments. Its first two are pretty straightforward.

Infrastructure is the largest segment, accounting for 44% of revenue. Like its name suggests, this business provides services for infrastructure projects.

More specifically, helps clients with land development, transportation projects, and power delivery.

Next up is building, technology, and sciences (“BTS”). BTS provides consulting services for building construction. It also helps outfit those buildings with plumbing, electric, and HVAC systems.

Infrastructure and BTS have been good industries for NV5. And they’re set to benefit from supply-chain supercycle tailwinds.

With demand growing for infrastructure consulting, the company has made more than two dozen acquisitions since 2017. Most were small purchases that added to the company’s capabilities without being a burden to integrate.

However, in 2019, NV5 made a $318 million splash when it bought geospatial leader Quantum Spatial.

This deal made NV5 the top provider of geospatial data in the U.S. Quantum relies on sonar and drone technology that helps people find the most suitable land for buildings.

Its services are also essential for coastal management, offshore wind power, and vegetation growth monitoring.

NV5 began reporting geospatial solutions as its own segment in 2020. It followed up its Quantum acquisition with four more purchases, including a geospatial business from defense contractor L3Harris Technologies (LHX).

This is a complex field. Geospatial analysis contributes essential data for complicated projects like offshore wind-turbine construction.

And NV5 has the best data collection services, which is why 96% of this segment’s revenue is recurring.

The company even provides subscription software that allows customers to monitor their geography once a project is completed.

NV5’s three business units have made it a one-stop shop for infrastructure consulting. But the market is concerned about its growth outlook, in part because of high interest rates.

We can see what the market thinks through our Embedded Expectations Analysis (“EEA”) framework.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.

At the current stock price, the market expects the company’s Uniform return on assets ”ROA” to decline to 13% from 26% last year.

The U.S. needs to invest in its infrastructure. Government agencies and corporations are setting aside millions of dollars to improve our roads, bridges, and factories.

They’ll need help to make sure the projects go smoothly.

NV5’s backlog was at an all-time high entering 2025. Clients are ready to begin new projects.

The company is one of the market’s leading infrastructure consultants. As it builds out its geospatial business, it’s making itself essential to every part of the infrastructure life cycle.

The market hasn’t caught on to NV5’s potential. With the supply-chain supercycle underway, its stock can offer substantial upside.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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