Tens of thousands of patrol vehicles, fire engines, and other public safety vehicles operate daily to respond to emergency situations.

Since public safety is paramount, federal and state governments allocate billions of dollars to safety equipment, vehicles, and emergency response capabilities. In 2024, the U.S. government spent over $500 billion on public order and safety expenditures.

Public safety and emergency services need reliable equipment for emergency response. Fire trucks, police cars, and other specialized vehicles require constant maintenance. Equipment such as emergency sirens, alarm systems, and public address systems are essential as well.

That’s why companies specializing in those needs tend to be stable businesses.

And one of the best examples is Federal Signal (FSS), a leading safety equipment and specialty vehicle original equipment manufacturer (“OEM”).

The company currently derives its sales from two major segments: Environmental Solutions Group (“ESG”) and Safety Security Systems Group (“SSG”).

The ESG segment manufactures street sweeper vehicles, safe digging trucks, industrial cleaning trucks, material hauling trucks, multi-purpose tractors, metal extraction support, road-marking and line-removal vehicles, refuse collection and recycling trucks, and others. ESG also offers aftermarket services.

On the other hand, SSG sells public safety equipment such as police car lights, industrial signaling equipment, and warning systems.

ESG generates most of Federal Signal’s sales, delivering 84% of the company’s total revenues (as of 2025) with SSG generating the remaining 16%.

While Federal Signal’s business units are strong performers, what has set the company apart and enabled it to grow is its status as a strategic acquirer.

Since 2016, Federal Signal has pursued 16 acquisitions. The businesses acquired throughout include a dump and body trailer manufacturer, road-marking equipment and services firms, a truck-mounted waterblasting equipment manufacturer, a waterblasting equipment, road-marking, and line-removal manufacturer, and most recently, a designer and manufacturer of refuse collection vehicles.

Federal Signal’s use of strategic acquisitions has enabled it to improve its business significantly over the past few years. Sales grew from $708 million in 2016 to $2.1 billion. Meanwhile, its Uniform return on assets (“ROA”) grew from 13% to 24% during the same period.

Despite being a strong performer, the company trades at a Uniform P/E of 22x, slightly below corporate average. This indicates that the market is pricing in steady demand while remaining mindful of municipal spending cycles. 

That said, Federal Signal’s status as a critical manufacturer, recurring aftermarket revenue, and acquisition strategy support durable earnings growth and sustained returns.

In other words, this company is one of the most stable businesses out there. And that makes it a compelling name for investors who are wary of market volatility in light of today’s AI-driven disruption and volatile geopolitical environment.

Best regards,

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

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