Last Update 08 Feb 26

WLDN: Alameda Contract And Revised Assumptions Will Support Higher Future Earnings Multiple

Analysts have lifted their price target on Willdan Group by $25, citing updated assumptions around discount rates, revenue growth, profit margins, and future P/E that support a higher fair value estimate.

Analyst Commentary

Bullish Takeaways

Bullish analysts see the higher price target as better aligned with updated assumptions around discount rates, which lift their estimate of fair value for the stock.
Revised expectations for revenue growth are a key input in the higher target, with analysts viewing the current valuation as more reasonable given their updated growth framework.
Assumptions for profit margins have been adjusted in models, and bullish analysts argue that, if management delivers close to those margin levels, the current share price leaves room for upside to their fair value view.
Changes to the future P/E assumption are a major driver of the new target, with supportive analysts arguing that the business profile could justify a higher multiple than previously used in their forecasts.

Bearish Takeaways

More cautious analysts point out that the higher price target depends on several modeling assumptions, including discount rates and P/E, that may prove optimistic if execution or market conditions fall short.
Some are wary that updated revenue growth expectations are not yet fully backed by reported results, which could put pressure on the valuation if growth tracks at the lower end of scenarios.
There is also concern that the margin assumptions baked into the new target leave less room for operational missteps, which could compress the fair value estimate if costs run higher than expected.
Cautious analysts remind investors that a higher target does not remove typical project, policy, or funding risks in the company’s end markets, which can affect both earnings visibility and the multiple the market is willing to pay.

What's in the News

Alameda County, California selected Willdan Group for a US$97 million energy and infrastructure contract covering design and implementation work across 24 sites, focused on upgrades that include electrification of major HVAC systems, solar PV, EV charging, and other efficiency and decarbonization projects (Key Developments).
The contract is structured as an energy savings performance project, in which the planned upgrades are expected to reduce annual carbon emissions by approximately 1.7 metric tons of CO2e, aligning the work with the County's decarbonization goals (Key Developments).
Willdan is also providing consulting services to Alameda County to identify outside funding opportunities, with the aim of reducing the County's out of pocket costs for the planned energy and infrastructure upgrades (Key Developments).

Valuation Changes

Fair Value: The fair value estimate remains at US$145.00 per share, with no change from the prior model.
Discount Rate: The discount rate moves slightly from 7.22% to about 7.21%, reflecting a very small adjustment in the model's risk assumptions.
Revenue Growth: The modeled long run revenue growth rate is effectively unchanged, staying close to 10.25%.
Net Profit Margin: The long run net profit margin assumption is essentially flat at about 7.88%.
Future P/E: The forward P/E multiple used in the valuation is largely steady, moving marginally from about 38.95x to 38.94x.

Expanding electrification and infrastructure demand, strategic acquisitions, and proprietary technology are driving robust organic growth, larger projects, and higher-margin recurring revenue streams.
Strong utility and municipal contracts, alongside grid modernization investments and trusted client relationships, provide stability, reduced volatility, and long-term growth opportunities.
Heavy dependence on policy-driven energy projects, acquisition risks, rising costs, and tax changes could pressure margins and earnings growth if not proactively mitigated.

Catalysts

About Willdan Group

Provides professional, technical, and consulting services primarily in the United States.What are the underlying business or industry changes driving this perspective?

Rapidly expanding demand for electrification and AI-driven data centers, combined with resilient infrastructure investment, is driving multi-year growth in Willdan's core addressable markets, supporting robust organic revenue growth and large new contract wins that should substantially increase top-line results.
Willdan's ongoing rollout of proprietary software and analytics platforms, paired with its established consulting services, is creating cross-selling opportunities and enabling technology-driven solutions for clients. This positions the company to capture higher-margin, recurring revenue streams, and improve gross margins.
Strategic acquisitions that deepen technical capabilities and expand Willdan's geographic and sector footprint are accelerating organic growth via cross-selling and enabling entry into larger, more complex energy and infrastructure projects, driving both revenue and earnings expansion.
Long-term and increasing utility and municipal contracts-typically 3-5 years in duration and funded through stable sources-are contributing to recurring revenue and improved earnings visibility, reducing earnings volatility and supporting higher net margins.
Ongoing investments and planning for grid modernization, combined with the company's strong reputation with utility commissions and government agencies, position Willdan to benefit disproportionately from federal/state decarbonization mandates and infrastructure modernization initiatives, supporting sustained revenue and EBITDA growth over the long term.

Willdan Group Earnings and Revenue Growth

Willdan Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Willdan Group's revenue will grow by 11.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.6% today to 8.9% in 3 years time.
Analysts expect earnings to reach $76.9 million (and earnings per share of $4.65) by about September 2028, up from $35.2 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.8x on those 2028 earnings, down from 39.5x today. This future PE is greater than the current PE for the US Professional Services industry at 26.3x.
Analysts expect the number of shares outstanding to grow by 3.82% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

Willdan Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The forthcoming expiration of the 179D tax deduction is expected to increase Willdan's effective tax rate from ~15% to around 20%, which could meaningfully reduce future net income and EPS growth if not offset by other tax benefits or by higher pre-tax earnings.
The company's high reliance (~85% of revenue) on energy projects funded by utilities and governmental clients exposes it to policy changes or budget cuts, potentially leading to revenue volatility and decreasing earnings visibility, particularly if government energy efficiency priorities shift.
Willdan's strategy of growth through acquisitions carries ongoing integration risk; failures or delays in realizing expected synergies, or overpayment for targets, could dilute net margins and burden the company with higher debt or impairments.
Persistent increases in G&A expenses, mainly due to rising wages, incentive compensation, and stock-based compensation, may pressure operating margins-especially if current revenue growth rates moderate or if inflation accelerates labor costs further.
The risk of tariffs and related supply chain disruptions, while currently mitigated, could escalate in severity; if the industry is unable to pass these costs on via escalator clauses or faces equipment shortages, gross margins could contract, impacting overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $132.5 for Willdan Group based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $867.2 million, earnings will come to $76.9 million, and it would be trading on a PE ratio of 33.8x, assuming you use a discount rate of 7.1%.
Given the current share price of $94.81, the analyst price target of $132.5 is 28.4% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Electrification And AI Data Centers Will Empower Grid Modernization