1 Unstoppable Multibagger Up 1,280% Since 2011 to Buy and Hold Forever

Core Viewpoint - Federal Signal is positioned for continued growth and multibagger returns due to its leadership in niche markets and strategic acquisitions [1][3]. Company Overview - Federal Signal manufactures vehicles and equipment for maintenance, infrastructure, and public safety, holding a leading market share in its segments [2][4]. - The company operates through two main segments: Environmental Solutions Group (83% of sales) and Safety and Security Systems Group (17% of sales) [4]. Revenue Sources - 41% of sales come from the cyclical industrial sector, while 51% are generated from publicly funded sources, providing revenue stability [5]. - The aftermarket segment, accounting for 27% of revenue, contributes recurring maintenance revenue and equipment-as-a-service [6]. Growth Drivers - The vacuum trucks segment, which represents 22% of sales, benefits from the adoption of safe digging practices across North America [7]. - Federal Signal has made 11 acquisitions since 2016, expanding into new verticals and enhancing growth potential [8][9]. Acquisition Strategy - The company targets reasonably priced niche-market leaders for acquisitions, exemplified by the purchases of Ground Force Worldwide and TowHaul, which positioned it as a leader in metal-extraction support [9][10]. - The acquisition of Trackless Vehicles for $54 million further diversified its offerings into snow and ice management and vegetation care [10]. Financial Performance - Federal Signal has a return on invested capital (ROIC) of 15%, exceeding its weighted-average cost of capital (WACC) of 10%, indicating effective capital utilization [11]. - The company has achieved a 10% annual sales growth over the past decade, with management targeting low double-digit growth moving forward [12]. Dividend Policy - The company has quadrupled its dividend payments since 2014, currently offering a 0.5% yield with a low payout ratio of 15%, allowing room for further increases and M&A activities [13]. Valuation - Federal Signal's price-to-earnings (P/E) ratio is currently at 26, comparable to the S&P 500 average of 27, suggesting a fair valuation following a recent 14% price dip [14].