Fenimore Asset Management, an investment management company, released its Q4 2025 investor letter. A copy of the same can be downloaded here. The stock market was solid in 2025 but volatile. While investors balanced AI enthusiasm, economic uncertainty, and monetary policy concerns.  The summer rally was driven by AI-related spending and economic resiliency, whereas the fourth quarter saw a more volatile market due to valuation pressures and macro uncertainty. Stocks from the large-cap technology and communi ...

Core Viewpoint - FirstService Corporation will release its financial results for Q4 2025 on February 4, 2026, at 7:30 am ET [1] Group 1: Financial Results Announcement - The financial results will be reviewed in a conference call hosted by CEO D. Scott Patterson and CFO Jeremy Rakusin at 11:00 am ET on the same day [2] - A live webcast of the conference call will be available on the company's website, and participants can register to receive dial-in information [2] Group 2: Company Overview - FirstService Corporation is a leader in the North American property services sector, operating through two main platforms: FirstService Residential and FirstService Brands [4] - The company generates approximately US$5.5 billion in annual revenues and employs over 30,000 individuals across North America [5] - FirstService's shares are traded on NASDAQ and the Toronto Stock Exchange under the symbol "FSV" and are included in the S&P/TSX 60 Index [5]

Core Insights - The article compares TPG RE Finance Trust (TRTX) and FirstService (FSV) to determine which stock offers better value for investors [1] Valuation Metrics - TRTX has a Zacks Rank of 2 (Buy), indicating a stronger earnings outlook compared to FSV, which has a Zacks Rank of 4 (Sell) [3] - TRTX's forward P/E ratio is 9.04, significantly lower than FSV's forward P/E of 27.33, suggesting TRTX may be undervalued [5] - The PEG ratio for TRTX is 1.95, while FSV's PEG ratio is 2.73, indicating TRTX has a more favorable growth outlook relative to its valuation [5] - TRTX's P/B ratio is 0.66, compared to FSV's P/B of 5.34, further supporting the argument that TRTX is undervalued [6] - TRTX earns a Value grade of B, while FSV receives a Value grade of C, highlighting TRTX's superior valuation metrics [6]

Core Insights - The real estate sector is experiencing a trend of oversold stocks, presenting potential buying opportunities for undervalued companies [1] - The Relative Strength Index (RSI) is a key indicator used to identify oversold conditions, with a value below 30 indicating potential buying opportunities [1] Company Summaries - **Fermi Inc (NASDAQ:FRMI)**: Priced its IPO at $21 per share, but the stock has fallen approximately 30% in the past five days, with a 52-week low of $18.70. Current RSI is 27.4, and shares closed at $19.84, down 0.3% [5] - **Apartment Investment and Management Co (NYSE:AIV)**: Recently closed the sale of four properties for $490 million and declared a special cash dividend of $2.23 per share. The stock has decreased around 26% over the past month, with a 52-week low of $5.49. Current RSI is 24, and shares closed at $5.69, up 0.4% [5] - **FirstService Corp (NASDAQ:FSV)**: Reported mixed quarterly results, with CEO noting resilient growth despite market challenges. The stock has fallen about 13% in the past month, with a 52-week low of $153.13. Current RSI is 11.3, and shares closed at $166.73, down 9.8% [5]

Financial Data and Key Metrics Changes - Total revenues increased by 4% year-over-year to $1.45 billion, driven by tuck-under acquisitions, while organic growth was flat overall [3][12] - EBITDA rose by 3% to $165 million, with a consolidated margin of 11.4%, slightly down from 11.5% in the previous year [3][12] - Earnings per share (EPS) increased by 8% to $1.76 [3][12] - Year-to-date revenues reached $4.1 billion, up 7% from $3.85 billion in the prior year, with adjusted EBITDA at $425 million, a 13% increase [12][13] Business Line Data and Key Metrics Changes - **FirstService Residential**: Revenues grew by 8% with organic growth at 5%, supported by solid net contract wins [4][13] - **FirstService Brands**: Revenues were up 1%, but organic declines of 4% were noted, particularly in restoration brands [4][14] - **Roofing Segment**: Revenues increased mid-single digits due to acquisitions, but organic revenues declined by 8% [7][9] - **Century Fire Protection**: Revenues rose over 10%, driven by strong repair, service, and inspection revenues [9][10] Market Data and Key Metrics Changes - Industry-wide claim activity and weather-related damage were modest across North America, leading to a decline in restoration revenues compared to the previous year [5][6] - The company anticipates a 20% decline in restoration revenues for Q4 compared to the prior year due to minimal storm-related revenues [6][7] - The roofing segment is experiencing delays in large commercial projects and a general reduction in new construction, impacting organic growth [8][9] Company Strategy and Development Direction - The company remains focused on long-term growth opportunities in restoration and roofing despite current macroeconomic challenges [30][40] - Recent acquisitions in roofing are aimed at expanding presence in key markets, with a commitment to investing in the roofing segment [9][16] - The company is actively pursuing tuck-under acquisitions, although competition remains high, particularly in fire protection and residential property management [35][36] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic stability is needed for improvement in commercial construction and to release deferred work [30][40] - The outlook for Q4 indicates revenues roughly in line with the prior year, with expectations of mid-single-digit growth in consolidated annual revenues for the full year [17][30] - Management expressed confidence in the long-term demand prospects for roofing and restoration, citing aging building stock and increased weather events as key drivers [40][41] Other Important Information - The company generated over $125 million in cash flow from operations during Q3, totaling $330 million year-to-date, a significant increase of approximately 65% year-over-year [15][16] - The balance sheet showed net debt of $985 million, with a leverage ratio of 1.7 times net debt to trailing 12 months EBITDA [16] Q&A Session Summary Question: Divergence in performance between Century Fire Protection and roofing business - Management explained that Century Fire Protection's service, repair, and inspection business is more recurring and has been resilient, benefiting from growth in data centers [19][20] Question: Margins in the Brands division - Management highlighted strong profitability in home improvement and Century Fire, attributing it to operational efficiencies and client relationships [21][22] Question: Market share gains in restoration - Management noted that efforts in positioning with national accounts and increased activity across the branch network contributed to market share gains [25][26] Question: Outlook for FirstService Residential margins - Management indicated that while margin improvements have been significant, some tapering is expected in Q4 due to seasonal factors [27][28] Question: Roofing project delays and future growth - Management acknowledged the uncertainty in the market but expressed confidence in the long-term demand prospects for roofing [30][40] Question: Competition for tuck-under deals - Management confirmed that the M&A environment remains competitive, particularly in roofing, but they continue to seek opportunities [35][36] Question: Backlog status in restoration - Management reported that the backlog is stable but slightly off from last year, with some impact from previous storm-related work [48] Question: Performance in Florida - Management stated that Florida's performance is in line with expectations, with some budgetary pressures alleviated due to stabilization in the insurance market [50]

Financial Data and Key Metrics Changes - Total revenues increased by 4% year-over-year to $1.45 billion, driven by tuck-under acquisitions, while organic growth was flat overall [3][12] - EBITDA rose by 3% to $165 million, with a consolidated margin of 11.4%, slightly down from 11.5% in the previous year [3][12] - Earnings per share (EPS) increased by 8% to $1.76 [3][12] - Year-to-date revenues reached $4.1 billion, up 7% from $3.85 billion in the prior year, with adjusted EBITDA at $425 million, a 13% increase [12][13] Business Line Data and Key Metrics Changes - **FirstService Residential**: Revenues increased by 8% to $605 million, with organic growth at 5% [4][13] - **FirstService Brands**: Revenues were up 1% to $842 million, but organic declines of 4% were noted [4][14] - **Restoration Brands**: Revenues were down 7% year-over-year, despite sequential growth relative to Q2 [4][5] - **Roofing Segment**: Revenues increased mid-single digits due to acquisitions, but organic revenues declined by 8% [7][8] - **Century Fire Protection**: Revenues grew over 10% year-over-year, supported by strong repair, service, and inspection revenues [9][12] Market Data and Key Metrics Changes - Industry-wide claim activity and weather-related damage were modest across North America, leading to lower revenues from named storms compared to the previous year [5][6] - The company anticipates a 20% decline in revenues for Q4 compared to the prior year due to minimal storm-related revenues [6][7] - The roofing segment is experiencing delays in large commercial projects and a general reduction in new construction [8][39] Company Strategy and Development Direction - The company remains focused on long-term growth opportunities in restoration and roofing, despite current macroeconomic challenges [30][31] - Recent acquisitions in roofing are aimed at expanding presence in key markets [8][9] - The company is committed to maintaining a strong balance sheet and generating consistent free cash flows [16] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic stability is needed for improvement in commercial construction and to release deferred work [30][39] - The outlook for Q4 indicates revenues roughly in line with the prior year, culminating in mid-single-digit growth for the full year [17] - Management expressed confidence in the long-term demand prospects for roofing and restoration, driven by aging infrastructure and increased weather events [39] Other Important Information - Cash flow from operations for Q3 was over $125 million, totaling $330 million year-to-date, a significant increase of approximately 65% year-over-year [15] - The company has a net debt of $985 million, with a leverage ratio of 1.7x net debt to trailing 12 months EBITDA [16] Q&A Session Summary Question: Divergence in performance between Century Fire and roofing business - Management explained that Century Fire's service, repair, and inspection business is more resilient due to its recurring nature and focus on data centers, while roofing is facing delays [19][20] Question: Margins in the Brands division - Management highlighted strong profitability in home improvement and Century Fire, despite challenges in restoration and roofing [21][22] Question: Market share gains in restoration - Management attributed market share gains to solidifying relationships with national accounts and increased activity across the branch network [25][26] Question: Margins and seasonal weakness in FirstService Residential - Management indicated that while margins may taper, ongoing initiatives are in place to maintain efficiency [27][28] Question: Impact of macroeconomic factors on roofing - Management noted that macroeconomic stability is essential for the release of deferred work and that the long-term demand prospects remain strong [30][39] Question: Competition for tuck-under deals - Management acknowledged a competitive environment for acquisitions, particularly in fire protection and residential property management [34][35] Question: Backlog status in restoration - Management reported that the backlog is stable but slightly down from last year due to previous strong performance in Canada [47] Question: Florida's performance in FirstService Residential - Management stated that Florida's performance is in line with expectations, with some budgetary pressures alleviated [49] Question: Pricing power and cost pressures - Management expressed confidence in maintaining pricing power across various segments, with a focus on efficiency [52][56] Question: Acquisition strategy in roofing - Management confirmed ongoing interest in acquisitions, focusing on cultural fit and strategic alignment [46]

Financial Data and Key Metrics Changes - Total revenues increased by 4% year-over-year to $1,450,000,000, driven by tuck-under acquisitions, while organic growth was flat overall [5][16] - EBITDA rose by 3% to $165,000,000, with a consolidated margin of 11.4%, slightly down from 11.5% in the previous year [5][16] - Earnings per share increased by 8% to $1.76 [5][16] - Year-to-date revenues reached $4,100,000,000, up 7% from $3,850,000,000 in the prior year, with adjusted EBITDA at $425,000,000, reflecting a 13% increase [17] Business Line Data and Key Metrics Changes - **FirstService Residential**: Revenues increased by 8% to $675,000,000, with organic growth at 5% [5][18] - **FirstService Brands**: Revenues were up 1% to $842,000,000, but organic growth declined by 4% [6][19] - **Restoration Brands**: Revenues were down 7% year-over-year, impacted by lower industry-wide claim activity and weather-related damage [6][7] - **Roofing Segment**: Revenues increased by mid-single digits due to acquisitions, but organic revenues declined by 8% [9][10] - **Century Fire**: Revenues grew over 10% year-over-year, supported by strong repair, service, and inspection revenues [14] Market Data and Key Metrics Changes - Industry-wide claim activity and weather-related damage were modest across North America, leading to lower revenues from named storms compared to the previous year [7][8] - The company anticipates a 20% decline in revenues for Q4 compared to the prior year due to minimal storm-related revenues [8][9] Company Strategy and Development Direction - The company remains focused on long-term growth opportunities in restoration and roofing despite current macroeconomic challenges [40] - Recent acquisitions in roofing are aimed at expanding presence in key markets [12] - The company is committed to maintaining a strong balance sheet and generating consistent free cash flows [21] Management's Comments on Operating Environment and Future Outlook - Management noted that the current environment is impacting new commercial construction and causing delays in reroof and maintenance decisions [12][40] - The outlook for Q4 indicates modest growth in roofing revenues due to acquisitions, but continued organic weakness is expected [13][22] - Management expressed confidence in the long-term demand drivers for roofing and restoration services [40] Other Important Information - Cash flow from operations for Q3 was over $125,000,000, with year-to-date cash flow at $330,000,000, a 65% increase year-over-year [20] - The company has a net debt of $985,000,000, resulting in a leverage ratio of 1.7 times net debt to trailing twelve months EBITDA [21] Q&A Session Summary Question: Divergence in performance between Century Fire and roofing business - Management explained that Century Fire's business is more resilient due to its focus on service repair and inspection, which is less affected by new construction delays [26][27] Question: Margins in the brands division - Management highlighted that home improvement initiatives have led to strong profitability despite weak restoration and roofing results [29][30] Question: Market share gains in restoration - Management noted that efforts to solidify relationships with national accounts have resulted in increased market share despite a weak backdrop [33][34] Question: Outlook for roofing and restoration - Management indicated that macroeconomic stability is needed for improvement in commercial construction and roofing activity [39][40] Question: Competition for tuck-under deals - Management acknowledged that competition remains high for acquisitions, particularly in fire protection and residential property management [43][44] Question: Pricing and cost relationship - Management stated that pricing power is currently stable, but there may be cost pressures in roofing due to labor availability [66][70] Question: Backlog status in restoration - Management reported that the backlog is stable but slightly down from last year due to strong prior year performance [60] Question: Florida's performance in FirstService Residential - Management confirmed that Florida's performance is in line with expectations, with some budgetary pressures alleviated [62]

Financial Data and Key Metrics Changes - Total revenues increased by 4% year-over-year to $1.45 billion, driven by tuck-under acquisitions, while organic growth was flat overall [3][10] - EBITDA rose by 3% to $165 million, with a consolidated margin of 11.4%, slightly down from 11.5% in the previous year [3][10] - Earnings per share increased by 8% to $1.76 [3][10] - Year-to-date revenues reached $4.1 billion, up 7% from $3.85 billion in the prior year [10][11] - Adjusted EBITDA for the year-to-date was $425 million, reflecting a 13% increase year-over-year [11] Business Line Data and Key Metrics Changes - **FirstService Residential**: Revenues increased by 8% to $605 million, with organic growth at 5% [4][11] - **FirstService Brands**: Revenues were up 1% to $842 million, but EBITDA decreased from $105.8 million to $102.1 million, resulting in a margin compression to 12.1% [12][13] - **Restoration Brands**: Revenues were down 7% year-over-year, impacted by lower industry-wide claim activity and weather-related damage [5][6] - **Roofing Segment**: Revenues increased mid-single digits due to acquisitions, but organic revenues declined by 8% [6][7] - **Century Fire Protection**: Revenues grew over 10% year-over-year, supported by strong repair, service, and inspection revenues [8] Market Data and Key Metrics Changes - Industry-wide claim activity and weather-related damage were modest across North America, leading to a significant decline in storm-related revenues compared to the previous year [5][6] - The company anticipates a 20% decline in revenues for Q4 compared to the prior year due to the absence of significant weather events [5][6] - The roofing market is experiencing delays in new construction and reroofing projects, impacting overall performance [7][36] Company Strategy and Development Direction - The company remains focused on long-term growth opportunities in restoration and roofing despite current macroeconomic challenges [27][39] - Recent acquisitions in the roofing segment aim to enhance market presence and capabilities in key regions [7][8] - The company is committed to maintaining a strong balance sheet and generating consistent free cash flows [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the current environment is impacting new commercial construction and causing delays in project decisions [27][39] - The outlook for Q4 indicates revenues roughly in line with the prior year, with expectations of mid-single-digit growth for the full year [16] - Management expressed confidence in the long-term demand drivers for roofing and restoration, citing aging infrastructure and increased weather events as key factors [34] Other Important Information - Cash flow from operations for the third quarter was over $125 million, with year-to-date cash flow totaling $330 million, a 65% increase year-over-year [13][14] - The company has a net debt of $985 million, with a leverage ratio of 1.7 times net debt to trailing 12 months EBITDA [15] Q&A Session Summary Question: Divergence in performance between Century Fire Protection and roofing business - Management explained that Century Fire Protection has a significant portion of its business in service, repair, and inspection, which is more resilient compared to roofing [18][19] Question: Margins in the Brands division - Management highlighted strong profitability in home improvement and Century Fire, despite challenges in restoration and roofing [20][21] Question: Market share gains in restoration - Management noted that efforts in positioning with national accounts and solidifying the account base have led to market share gains [23][24] Question: Outlook for FirstService Residential margins - Management indicated that while margin improvements have been significant, some tapering is expected in Q4 due to seasonal factors [25][26] Question: Impact of macroeconomic factors on roofing projects - Management acknowledged that macroeconomic stability is needed for improvement in commercial construction and project releases [27][34] Question: Competition for tuck-under deals - Management confirmed that the M&A environment remains competitive, particularly in fire protection and residential property management [29][31] Question: Backlog status in restoration business - Management reported that the backlog is stable but slightly down from last year, influenced by previous strong performance in Canada [40] Question: Performance in Florida for FirstService Residential - Management stated that Florida's performance is in line with expectations, with some budgetary pressures alleviated [41]

Core Viewpoint - FirstService (FSV) reported quarterly earnings of $1.76 per share, exceeding the Zacks Consensus Estimate of $1.75 per share, and showing an increase from $1.63 per share a year ago, indicating a positive earnings surprise of +0.57% [1] Financial Performance - The company posted revenues of $1.45 billion for the quarter ended September 2025, which was below the Zacks Consensus Estimate by 1.18%, but an increase from $1.4 billion year-over-year [2] - Over the last four quarters, FirstService has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Performance and Outlook - FirstService shares have increased by approximately 2.1% since the beginning of the year, while the S&P 500 has gained 13.9% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $1.47 on revenues of $1.44 billion, and for the current fiscal year, it is $5.87 on revenues of $5.57 billion [7] - The estimate revisions trend for FirstService was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Real Estate - Operations industry, to which FirstService belongs, is currently ranked in the top 26% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance - Consolidated revenues for Q3 2025 were $1.45 billion, a 4% increase compared to Q3 2024[3] - Adjusted EBITDA for Q3 2025 was $164.8 million, reflecting a 3% increase year-over-year[3] - Adjusted EPS for Q3 2025 was $1.76, representing an 8% growth over the same quarter last year[3] - For the nine months ended September 30, 2025, consolidated revenues reached $4.11 billion, a 7% increase from the prior year[4] - Adjusted EBITDA for the nine months was $425.2 million, up 13% year-over-year[4] - Revenues for the three months ended September 30, 2025, reached $1,447,565,000, representing a growth of 3.7% compared to $1,396,041,000 in 2024[24] - Total revenues for 2025 reached $1,447,565, an increase from $1,396,041 in 2024, representing a growth of approximately 3.7%[29] - Adjusted EBITDA for 2025 was $164,780, compared to $159,974 in 2024, indicating a year-over-year increase of about 3.4%[29] - For the nine months ended September 30, 2025, consolidated revenues were $4,114,124, compared to $3,851,545 in the same period of 2024, marking a growth of around 6.8%[29] - Adjusted EBITDA for the nine months ended September 30, 2025, was $425,174, an increase from $375,834 in 2024, representing a growth of approximately 13.1%[29] Segment Performance - FirstService Residential revenues for Q3 2025 were $605.4 million, an 8% increase year-over-year, with organic growth of 5%[8] - FirstService Brands revenues for Q3 2025 were $842.1 million, a 1% increase, but organic revenues declined by 4%[10] - The company reported a decrease in operating earnings for the Residential segment in 2025, with a loss of $36,716 compared to a loss of $37,098 in 2024[29] - The Corporate segment showed an increase in adjusted EBITDA from $(16,234) in 2024 to $(13,384) in 2025, indicating improvement[29] Earnings and Profitability - GAAP diluted EPS for Q3 2025 was $1.24, down from $1.34 in the prior year[3] - Net earnings for the three months ended September 30, 2025, were $70,887,000, a decrease of 8.4% compared to $77,761,000 for the same period in 2024[22] - Adjusted net earnings for the three months ended September 30, 2025, increased to $80,812,000, up 9.4% from $73,769,000 in 2024[22] - Diluted earnings per share for the three months ended September 30, 2025, were $1.24, down from $1.34 in 2024[23] - Adjusted earnings per share for the nine months ended September 30, 2025, were $4.39, compared to $3.66 in 2024, reflecting a growth of 19.9%[23] - Operating earnings for 2025 amounted to $115,628, up from $125,902 in 2024, reflecting a decrease of approximately 8.2%[29] - Operating earnings for the nine months ended September 30, 2025, totaled $252,164, compared to $247,897 in 2024, showing an increase of about 1.3%[29] Cash Flow and Debt - Cash provided by operating activities for the three months ended September 30, 2025, was $126,362,000, an increase from $77,011,000 in 2024[27] - The company reported a total debt of $1,205,222,000 as of September 30, 2025, compared to $1,298,710,000 at the end of 2024[26] - The net cash used in investing activities for the three months ended September 30, 2025, was $79,504,000, compared to $26,861,000 in 2024[27] Assets and Goodwill - The company’s goodwill and intangible assets totaled $2,191,125,000 as of September 30, 2025, up from $2,110,866,000 at the end of 2024[26] - The company’s total assets increased to $4,385,356,000 as of September 30, 2025, from $4,194,852,000 at the end of 2024[26] Future Outlook - CEO Scott Patterson noted ongoing market challenges but expects solid growth and profitability for the year[5] - The company is focusing on market expansion and new product development as part of its growth strategy moving forward[29] - Future guidance indicates continued revenue growth, with expectations to exceed $1.5 billion in total revenues for 2026[29]