Investor Cathie Wood is betting on infrastructure development in the United States. She currently holds 4.98 million shares of industrial software developer Trimble, Inc. (TRMB), representing a combined 0.8% weighting across four Ark Investment ETFs. Following a March 29 announcement of President Biden’s proposed $2 trillion infrastructure package, Wood increased her stake in TRMB, purchasing 1.45 million additional shares. As of April 9. Wood had a 1.99% stake in TRMB.

As the owner of the world’s largest actively traded ETF company, Wood’s investment picks have eventuated to be amongst the most profitable stocks with immense upside potential. Wood often places her bets on industry disruptive technology companies, with the potential to revolutionize operations in a particular industry.

In the current digitization era, TRMB’s software applications could pave the way for tech-oriented infrastructure development. This sentiment is shared by other institutional and retail investors, as evidenced by the stock’s price performance. Shares of TRMB have gained 136.7% over the past year, and 22.1% year-to-date.

Click here to check out our Infrastructure Sector Report for 2021

Here’s what we think could shape TRMB’s performance in the near term:

Extensive Operations

TRMB’s diversified business operations position it well  to benefit from a forthcoming  infrastructure and 5G boom. The company provides next-generation software solutions to multiple industries, including  Buildings & Infrastructure, Geospatial, Resources and Utilities, and Transportation. Along with the company’s significant stake in autonomous vehicle research, it also specializes in 5G network synchronization and Intelligent Automation. TRMB has a suite of satellite-enabled water technology software to facilitate irrigation in the United States, as well as applications in the budding commercial space industry.

On April 8, TRMB announced the availability of Trimble Quadri Building Information Modeling collaboration software in North America. This software is designed to provide a common data collaboration environment for 3D construction project modeling. Because the federal government proposes  to upgrade the country’s existing infrastructure base, including investments in the electric vehicle industry and water supply, TRMB’s state-of-the-art software should see rising demand.

As of March 26, TRMB was the GNSS Positioning Technology Supplier for VSI Lab autonomous vehicle research program. The company’s proprietary technology is expected to provide reliable breakthrough in-lane positioning for autonomous driving. In the same month, the company launched a GNSS timing module to deliver superior standards for 5G network synchronization.

Click here to checkout our 5G Industry Report for 2021

Impressive Growth Story and Profitability

TRMB’s net income and EBIT have increased at CAGRs of 22.2% and 48.8%, respectively, over the past three years. Its EPS rose at a CAGR of 49.9% over the past three years, while its tangible book value and levered free cash flow improved at CAGRs of 16.8% and 18.9%, respectively, over this period.

TRMB’s trailing-12-month gross profit margin of 58.78% is 20.9% higher than the industry average  48.63%. Its EBIT margin of 14.87% is more than double the industry average of 7.19%. TRMB’s trailing 12-month net income margin and levered free cash flow margin of 12.39% and 16.71%, respectively, are significantly higher than industry averages. The company’s trailing-12-month ROE, ROA and ROTC of 11.61%, 5.67% and 5.63% compare favorably with the respective industry averages.

POWR Ratings Show Promise

TRMB has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

TRMB has a B grade for Growth and Value. The company’s impressive growth trajectory over the past three years and lower-than-industry forward price/book multiple of 5.05 justify the grades.

TRMB is ranked #20 of 43 stocks in the B-rated Technology – Electronics industry. In total, we rate TRMB on eight different levels. Beyond what we’ve stated above, one  can check out additional TRMB Ratings for Sentiment, Stability, Momentum, and Quality here.

There are 22 other stocks in the Technology – Electronics industry with an overall rating of A or B. Click here to view them.

Bottom Line

Cathie Wood’s interest in TRMB stock attracted the attention of other investors causing the stock to hit its all-time high of $84.87 on April 6. And while a proposed federal infrastructure bill could drive TRMB to reach fresh highs, private investments in this industry could also contribute to the stock’s rally. With rising demand for home building and construction, combined with the EV industry and 5G technology need for robust infrastructure support, we think TRMB should witness a significant uptick in revenues and earnings in the coming months.

Click here to check out our Infrastructure Sector Report for 2021

TRMB shares were trading at $81.36 per share on Tuesday afternoon, up $0.06 (+0.07%). Year-to-date, TRMB has gained 21.85%, versus a 10.62% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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