APi Group (APG): A Bull Case Theory

We came across a bullish thesis on APi Group on Kairos Research’s Substack. As of 30ᵗʰ June, API Group’s share was trading at $50.31. APG’s trailing and forward P/E were 83.39 and 23.88 respectively according to Yahoo Finance.

API Group (APG) has seen significant growth since being pitched last November, with the stock up about 43% and 55% from the cost basis of $32.75 per share. The company continues to improve incrementally, raising financial targets and returning cash to shareholders. APG is a business services company focused on acquiring and growing compliance-driven testing, inspection, and service businesses, with a strong presence in fire safety, elevators, escalators, and security system services. The company’s inspection-led model has led to impressive branch-level improvements, with EBITDA margin growth from 13% in 2021 to 17% currently, aiming for 20% in North America and 18% internationally.

The company has delivered on its previous targets, including a 13% EBITDA margin and 55% of revenue from Inspection, Service and Monitoring, with 75% free cash flow conversion. New targets have been set, including $10 billion in revenue by 2028, 16% EBITDA margin, and 60+ % of revenue from Inspection Service and Monitoring. To achieve $10.4 billion in revenue, APG plans to focus on $1.4 billion in organic growth, $1 billion from smaller acquisitions, and $1 billion from one or two large platform acquisitions. The company aims to produce $3 billion in cumulative adjusted free cash flow through 2028, with potential for $4 billion.

Valuation suggests a path to $75-80 per share by 2028, assuming $10 billion in revenue, 16% adjusted EBITDA margin, and a slight multiple contraction to 15x EV/EBITDA. With a potential buyback of $1 billion and net leverage of 2.7x, the stock offers 57% upside. While this may not seem exciting to some, APG is a well-run company with a strong track record, and the author considers adding to their position if the stock dips to $40-45 per share.

Previously we covered a bullish thesis on APi Group Corporation by Kairos Research in November 2024, which highlighted the company’s inspection-led model, recurring revenue focus, and disciplined acquisitions in fire safety. The company’s stock price has appreciated approximately 37% since our coverage. This is because the thesis played out as expected. Kairos Research shares an identical view but emphasizes on updated targets and long-term growth projections.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.