Key Takeaways:
- Digital Shift: ACS (ACS) is aggressively pivoting to data centers, with digital infrastructure now accounting for 16% of the backlog and orders doubling in the sector.
- Price Projection: Our model projects the stock could climb to €100 per share by December 2027.
- Expected Returns: This target implies a modest 4.8% annualized return, suggesting that while the growth story is real, the current valuation leaves little room for outsized gains.
- Record Backlog: The company boasts a record backlog of €89.3 billion (+12.6% YoY), driven by massive wins in the U.S. and Australia.
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ACS (ACS) is no longer just a traditional construction company; it is transforming into a digital infrastructure giant.
The Spanish group reported stellar nine-month results, with sales surging 23.7% to €29 billion and net profit jumping 23.8% to €585 million.
The catalyst? Data centers. The company has secured over €6 billion in new data center orders, including major projects for hyperscalers like CoreWeave and a $500 million Stargate campus contract with OpenAI/Oracle.
However, the stock has rallied significantly, currently trading near €91.65. With the market clearly excited about the AI infrastructure theme, investors need to ask: Is there any value left on the table?
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What the Model Says for ACS Stock
We evaluated ACS’s potential through 2027, balancing the explosive growth in its digital backlog against a valuation that is historically stretched.
Our model signals “Hold.” Using a robust forecast of 12.3% Revenue Growth (CAGR) and 4.3% Operating Margins, the model projects the stock will reach €100 by the end of 2027.
This implies a 4.8% annualized return over the next two years.
While positive, this return is relatively thin compared to the execution risks involved in such a massive strategic pivot. The market seems to have already priced in a “blue sky” scenario.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ACS stock:
1. Revenue Growth: 12.3%
The growth is tangible and backed by orders.
Turner (ACS’s U.S. subsidiary) is driving the charge, achieving 36% organic growth as it consolidates its leadership in advanced technology projects.
The company is capitalizing on the “AI CaPex super-cycle.” Data center investment is expected to hit $600 billion in 2025, and ACS is winning a significant slice of that pie, with digital infrastructure orders nearly doubling.
We forecast strong revenue growth of 12.3% CAGR through 2027, reflecting the rapid conversion of this high-tech backlog into sales.
2. Operating Margins: 4.3%
Profitability is stable but low-margin.
Despite the high-tech focus, construction remains a low-margin business. EBITDA margins improved slightly to 5.1% (up 32 basis points), but net margins remain in the low single digits.
However, cash generation is improving. Net operating cash flow grew by €318 million to €2 billion, supporting strategic investments like the €436 million acquisition of Dornan.
We project operating margins to remain steady at 4.3%, as efficiency gains in digital projects are balanced by the inherent costs of large-scale construction.
3. Exit P/E Multiple: 19.3x
ACS currently trades at roughly 19.3x earnings, which is significantly higher than its 5-year average of 14.5x.
Our model assumes an exit multiple of 19.3x by 2027.
We chose a multiple that stays flat at today’s premium level. This is a generous assumption. It implies that the market will continue to view ACS as a “data center play” rather than a “builder” for years to come. If the narrative shifts back to traditional construction, the multiple could contract sharply, wiping out returns.
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What Happens If Things Go Better or Worse?
The risk-reward is heavily dependent on maintaining that premium valuation (these are estimates, not guaranteed returns):
- Low Case: If the AI infrastructure boom cools or margins slip, valuation compression could lead to a -5.5% annual return.
- Mid Case: Even with flawless execution, we project a modest 0.5% annual return (essentially flat price action) if multiples revert to historical norms.
- High Case: If the data center mania intensifies and margins expand further, returns could reach 5.3% annual return.
(Note: The returns above refer to price appreciation. Total shareholder return would be higher when adding the ~4.6% dividend yield.)
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How Much Upside Does ACS Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
