Federal Signal (FSS): Valuation Check After Strong Q3 Beat, Margin Expansion and Raised EPS Guidance

Simply Wall St.2025-12-11

Federal Signal (FSS) just posted a third quarter that checked several key boxes for investors, with revenue up 17% year on year, a margin lift, and full year EPS guidance pushed above Wall Street ...

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See our latest analysis for Federal Signal. The strong quarter has helped steady sentiment after a softer patch, with the share price now at $110.44 and a solid year to date share price return of 19.72 percent sitting alongside an impressive five year total shareholder return of 241.21 percent. This suggests the longer term momentum story remains intact even as near term gains consolidate. If Federal Signal’s run has you thinking about what else could deliver outsized gains over time, it might be worth exploring fast growing stocks with high insider ownership as a source of the next potential compounders. With shares near record highs after years of strong compounding, investors now face a tougher question: is Federal Signal still trading at a discount to its fundamentals, or is the market already pricing in its future growth? AdvertisementMost Popular Narrative Narrative: 16.3% Undervalued With Federal Signal last closing at $110.44 against a narrative fair value near the low $130s, the valuation hinges on sustained growth and richer margins. Analysts expect earnings to reach $336.9 million (and earnings per share of $5.07) by about September 2028, up from $221.6 million today. In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.1x on those 2028 earnings, down from 33.9x today. Read the complete narrative. Want to see what kind of revenue runway and margin lift could underpin a premium earnings multiple for an industrial name like this? The narrative unpacks a growth profile and profitability shift that many investors might usually associate with higher octane sectors. Curious how those assumptions stack up against today’s price and long term history? Dive in to see the specific levers this valuation relies on, and decide if they hold up for you. Result: Fair Value of $132 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, the story depends on robust municipal spending and successful acquisition integration, and either a budget squeeze or deal misstep could quickly challenge that optimism. Find out about the key risks to this Federal Signal narrative. Another View, Rich on Earnings While our fair value estimate suggests upside, a simple earnings lens paints a tougher picture. Federal Signal trades on a 28.5x price to earnings ratio, well above both the US Machinery industry at 24.9x and peers at 16.9x, and also above a 25x fair ratio that the market could move toward. That gap hints at valuation risk if growth or sentiment cools. How comfortable are you paying a premium today for a quality, but not hyper growth, story? See what the numbers say about this price — find out in our valuation breakdown. NYSE:FSS PE Ratio as at Dec 2025 Build Your Own Federal Signal Narrative If you want to stress test these assumptions or lean on your own research instead, you can build a personalised view in just a few minutes: Do it your way. A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Federal Signal. Ready for more high conviction ideas? Do not stop at one opportunity. Use the Simply Wall Street Screener to jump on focused stock ideas that match your strategy before the crowd catches on.  Capture potential bargains early by targeting companies trading below intrinsic value with these 905 undervalued stocks based on cash flows, based on future cash flows and fundamentals, not short term noise. Position yourself in the path of powerful AI tailwinds by zeroing in on these 26 AI penny stocks that pair innovation with real, growing revenues. Focus on these 12 dividend stocks with yields > 3% that combine meaningful yields with balance sheets built to sustain payouts.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: AI Stock Screener & AlertsOur new AI Stock Screener scans the market every day to uncover opportunities.• Dividend Powerhouses (3%+ Yield)• Undervalued Small Caps with Insider Buying• High growth Tech and AI CompaniesOr build your own from over 50 metrics.Explore Now for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. 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