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1. Company Snapshot

1.a. Company Description

CECO Environmental Corp.provides industrial air quality and fluid handling systems worldwide.It operates in two segments: Engineered Systems Segment and Industrial Process Solutions Segment.


The company engineers, designs, builds, and installs systems that capture, clean, and destroy air- and water-borne emissions from industrial facilities as well as fluid handling, gas separation, and filtration systems.It offers dampers and diverters, selective catalytic reduction and selective non-catalytic reduction systems, cyclonic technology, thermal oxidizers, filtration systems, scrubbers, and water and fluid handling equipment, as well as plant engineering services and engineered design build fabrication.The company markets its products and services to natural gas processors, transmission and distribution companies, refineries, power generators, industrial manufacturing, engineering and construction companies, semiconductor manufacturers, compressor manufacturers, beverage can manufacturers, metals and minerals, and electric vehicle producer companies.


CECO Environmental Corp.was incorporated in 1966 and is headquartered in Dallas, Texas.

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1.b. Last Insights on CECO

CECO Environmental Corp.'s recent performance was negatively impacted by a series of events, including the divestiture of its Fluid Handling business to May River Capital. This transaction, completed on March 31, 2025, resulted in an enterprise value of approximately $110 million, paid in cash at closing. The divestiture of this business segment may have disrupted CECO's operations and potentially led to a decline in revenue and profitability. Additionally, the company's recent earnings release highlighted a decline in non-GAAP net income, which fell 2% year-over-year. This decrease in profitability may be attributed to various factors, including the divestiture of the Fluid Handling business and potential operational challenges. Furthermore, the company's adjusted EBITDA decreased by 2% year-over-year, indicating a decline in earnings before interest, taxes, depreciation, and amortization. The recent news of May River Capital establishing a new flow control platform, Tusk Industrial, which includes the Dean, Fybroc, and Sethco pump brands, may also have contributed to the negative sentiment surrounding CECO Environmental Corp. This development may have raised concerns about the company's ability to maintain its market position and competitiveness in the flow control industry.

1.c. Company Highlights

2. CECO Environmental's Strong Q3 2025 Earnings: Is the Growth Story Overvalued?

CECO Environmental reported an impressive financial performance in Q3 2025, with revenues reaching $198 million, a 46% increase year-over-year, and adjusted EBITDA up 62% to $23.2 million. The company's EPS came in at $0.26, beating estimates of $0.25. Gross profit margins were approximately 33% in the quarter, down 70 basis points year-over-year due to an adverse project mix. The company's cash flow and indebtedness showed a net positive free cash flow of $19 million in the quarter.

Publication Date: Nov -23

📋 Highlights
  • Record Backlog Growth: New backlog of $720 million, up 64% YoY, driven by power, natural gas, and semiconductor demand.
  • Revenue Surge: Q3 revenue hit $198 million, a 46% YoY increase, nearing $200 million for the first time.
  • EBITDA Margin Expansion: Adjusted EBITDA margins rose 120 bps to 23.2% ($23.2M), despite adverse project mix.
  • Strong Sales Pipeline: Over $5.8 billion in pipeline, supporting 2026 revenue guidance of $850–$950 million (15–25% YoY growth).

Backlog and Sales Pipeline

The company's backlog has more than tripled since the end of 2021, reaching a record $720 million, driven by strong demand in power, natural gas infrastructure, semiconductor, and industrial water applications. The sales pipeline is over $5.8 billion, adding to its confidence for sustainable growth. As Todd Gleason, CEO, highlighted, the company's strong performance is driven by its diverse end market exposure and key mega themes.

Valuation and Growth Expectations

CECO Environmental's valuation metrics indicate a high growth expectation. The company's P/E Ratio is 34.2, and EV/EBITDA is 14.65. Analysts estimate next year's revenue growth at 14.9%. With a strong backlog and sales pipeline, the company is well-positioned for growth. However, the question remains whether the current valuation fully reflects the company's growth prospects.

Outlook and Risks

CECO Environmental expects orders to exceed $1 billion in 2026, with a greater than 1.1 book-to-bill ratio. The company targets revenue between $850 million and $950 million, up 15% to 25% year-over-year. Adjusted EBITDA is expected to be between $110 million and $130 million, up 20% to 40% year-over-year. However, the company faces risks related to macroeconomic conditions, interest rates, tariffs, and supply chain management. As Robert Brooks asked, the company assumes a stable economy, with no significant positive or negative changes.

3. NewsRoom

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First Eagle Small Cap Opportunity Fund Q3 2025 Portfolio Review

Nov -20

Source: seekingalpha.com

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CECO Environmental Announces Upcoming Investor Conferences

Nov -03

Source: globenewswire.com

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CECO Environmental Corp. (CECO) Q3 2025 Earnings Call Transcript

Oct -28

Source: seekingalpha.com

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CECO Environmental (CECO) Lags Q3 Earnings Estimates

Oct -28

Source: zacks.com

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CECO Environmental Reports Third Quarter 2025 Results

Oct -28

Source: globenewswire.com

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CECO Environmental to Release Third Quarter Earnings and Host Conference Call on October 28

Oct -14

Source: globenewswire.com

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New Strong Sell Stocks for October 7th

Oct -07

Source: zacks.com

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CECO Environmental Announces Upcoming Investor Conferences

Aug -11

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.80%)

6. Segments

Engineered Systems

Expected Growth: 7.5%

CECO Environmental Corp.'s Engineered Systems segment growth of 7.5% is driven by increasing demand for air pollution control systems, expansion in the oil and gas industry, and growing adoption of environmental regulations. Additionally, strategic acquisitions and investments in technology advancements have enhanced the company's product offerings, contributing to the segment's growth.

Industrial Process Solutions

Expected Growth: 8.5%

CECO Environmental Corp.'s Industrial Process Solutions segment growth of 8.5% is driven by increasing demand for air pollution control systems, growth in the oil and gas industry, and rising adoption of environmental regulations. Additionally, the company's strategic acquisitions and expansion into new markets have contributed to the segment's growth.

7. Detailed Products

Air Pollution Control Systems

CECO Environmental Corp. offers a range of air pollution control systems, including scrubbers, electrostatic precipitators, and fabric filters, designed to reduce emissions and improve air quality.

Industrial Ventilation Systems

CECO Environmental Corp. provides industrial ventilation systems, including fans, blowers, and ductwork, designed to improve indoor air quality and reduce the risk of explosion.

Filtration Systems

CECO Environmental Corp. offers a range of filtration systems, including cartridge filters, bag filters, and HEPA filters, designed to remove contaminants and improve air quality.

Noise Control Systems

CECO Environmental Corp. provides noise control systems, including acoustic enclosures, silencers, and sound barriers, designed to reduce noise pollution.

Environmental Consulting Services

CECO Environmental Corp. offers environmental consulting services, including air quality permitting, compliance testing, and emissions monitoring.

Industrial Cleaning Systems

CECO Environmental Corp. provides industrial cleaning systems, including vacuum systems, blowers, and cleaning solutions, designed to improve equipment reliability and reduce downtime.

8. CECO Environmental Corp.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for CECO Environmental Corp. is medium due to the availability of alternative environmental services and products.

Bargaining Power Of Customers

The bargaining power of customers for CECO Environmental Corp. is low due to the company's strong brand reputation and diversified customer base.

Bargaining Power Of Suppliers

The bargaining power of suppliers for CECO Environmental Corp. is medium due to the company's dependence on a few key suppliers for raw materials.

Threat Of New Entrants

The threat of new entrants for CECO Environmental Corp. is high due to the relatively low barriers to entry in the environmental services industry.

Intensity Of Rivalry

The intensity of rivalry for CECO Environmental Corp. is high due to the competitive nature of the environmental services industry and the presence of several established players.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 37.44%
Debt Cost 10.12%
Equity Weight 62.56%
Equity Cost 10.12%
WACC 10.12%
Leverage 59.84%

11. Quality Control: CECO Environmental Corp. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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H&E Equipment Services

A-Score: 5.4/10

Value: 3.3

Growth: 6.2

Quality: 5.8

Yield: 3.0

Momentum: 9.5

Volatility: 4.3

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CECO Environmental

A-Score: 4.5/10

Value: 2.0

Growth: 6.0

Quality: 6.6

Yield: 0.0

Momentum: 9.5

Volatility: 3.0

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A-Score: 4.3/10

Value: 1.4

Growth: 7.6

Quality: 8.2

Yield: 0.0

Momentum: 3.0

Volatility: 5.3

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TOMI Environmental Solutions

A-Score: 4.1/10

Value: 6.8

Growth: 3.3

Quality: 3.6

Yield: 0.0

Momentum: 9.0

Volatility: 1.7

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Fuel Tech

A-Score: 3.8/10

Value: 5.6

Growth: 2.4

Quality: 3.5

Yield: 0.0

Momentum: 9.5

Volatility: 2.0

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ClearSign Technologies

A-Score: 3.8/10

Value: 6.4

Growth: 7.4

Quality: 3.7

Yield: 0.0

Momentum: 4.0

Volatility: 1.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

54.93$

Current Price

54.93$

Potential

-0.00%

Expected Cash-Flows