Meet the Little-Known Serial Acquirer That Has Rocketed Past the S&P 500's Returns Since 2010

Core Viewpoint - Federal Signal (FSS) is a niche-leading specialty vehicle and public safety equipment manufacturer that has shown significant long-term performance, rising 1,460% since 2010, and is positioned for continued growth due to its market dominance and strategic acquisitions [2]. Group 1: Industry Dominance - Federal Signal operates through two main segments: Environmental Solutions Group (ESG) and Safety and Security Systems Group (SSG), contributing 83% and 17% of total revenue respectively [3]. - The ESG segment includes products such as vacuum trucks, street sweepers, and industrial cleaning equipment, while the SSG segment focuses on public safety equipment and warning systems [4]. - The company holds a top market share in its niches and benefits from diversification across various industries, which enhances its resilience [5][7]. Group 2: Acquisition Strategy - Federal Signal has successfully executed 13 acquisitions since 2016, enhancing its market position and entering new verticals [8]. - The acquisition of HOG Technologies for $92.5 million exemplifies this strategy, allowing the company to expand its road marking operations and enter the airport market [9][10]. - The company has maintained an average return on invested capital (ROIC) of 12% over the past decade, indicating effective management of its M&A activities [11]. Group 3: Financial Performance - Federal Signal's EBITDA margins have improved over time due to strategic acquisitions that enhance profitability [12]. - The company has seen significant growth in EBITDA and free cash flow compared to sales since 2010, providing ample funding for future acquisitions [13][14]. - Despite prioritizing M&A spending, Federal Signal raised its dividend by 17% this year following a 29% increase in adjusted earnings per share (EPS) [14][15]. Group 4: Valuation - Federal Signal has achieved sales and EPS growth of 9% and 13% over the last decade, yet trades at a price-to-earnings ratio of 23, below the S&P 500 average of 29 [16].