Infrastructure Spending And Flexible Work Trends Will Drive Modular Demand

Key Takeaways

• Strong demand for modular solutions drives higher utilization, longer leases, and a more stable, recurring revenue base, positioning for substantial growth and earnings.
  
• Focus on value-added products, digital capabilities, and sustainable innovation is expected to boost margins, operational efficiency, and long-term profitability.
  
• The shift to remote work, market saturation, and regulatory pressures threaten WillScot’s growth, margins, and market share, especially amid high leverage and potentially rising compliance costs.

Catalysts

Provides turnkey temporary space solutions in the United States, Canada, and Mexico.

• The multiyear surge in infrastructure programs and reshoring initiatives is driving a strong and growing order book, especially with large enterprise clients, leading to higher utilization of WillScot’s modular and storage fleet. This momentum supports stronger revenue visibility and provides a path for outsized revenue growth over the next several years.
  
• The expanding demand for flexible and temporary workspaces, underscored by increasing project-based and decentralized operations across industries, is resulting in longer lease durations and a more stable, recurring revenue base for WillScot, which positions the company to achieve above-average free cash flow and support higher earnings.
  
• WillScot’s strategic focus on increasing Value-Added Products and Services as a percentage of revenue—targeting a rise from the current 17% toward a long-term goal of 20% to 25%—is expected to boost revenue per unit and drive robust gross and net margin expansion as the business mix continues to improve.
  
• Industry-wide shifts toward speed, efficiency, and environmentally sustainable construction are accelerating adoption of modular building solutions, where WillScot’s investment in new product categories (such as climate-controlled units and FLEX complexes) and in-house capabilities create an innovation edge that should translate to enhanced revenue growth and margin gains.
  
• Continued investment in digital platforms, enhanced pricing engines, and logistics optimization is improving asset utilization, reducing costs, and creating meaningful operating leverage within WillScot’s existing fleet, which is expected to significantly increase adjusted EBITDA and free cash flow conversion as market conditions normalize and volumes rebound.

WillScot Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on WillScot Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming WillScot Holdings's revenue will grow by 5.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.6% today to 15.7% in 3 years time.
• The bullish analysts expect earnings to reach $439.4 million (and earnings per share of $2.82) by about July 2028, up from $14.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 22.1x on those 2028 earnings, down from 369.3x today. This future PE is lower than the current PE for the US Construction industry at 33.6x.
• Analysts expect the number of shares outstanding to decline by 3.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.36%, as per the Simply Wall St company report.

WillScot Holdings Future Earnings Per Share Growth

Risks

• The long-term shift toward remote and hybrid work models may continue to reduce the overall demand for modular offices and temporary workspace solutions, potentially pressuring revenue growth as WillScot’s addressable market shrinks.
  
• Demographic stagnation and slower urbanization in developed markets could suppress new construction and infrastructure projects, which risks curbing demand for WillScot’s modular and storage units and limiting top line growth over the long term.
  
• Persistent regulatory and environmental pressures may increase WillScot’s operating costs and limit certain project deployments, risking margin contraction and diminished net earnings if compliance and ESG demands intensify.
  
• WillScot’s high leverage, underscored by a current leverage ratio of 3.5 times and continued M&A activity, exposes the company to elevated interest expenses and vulnerability to higher rates, which could constrain net income and free cash flow if earnings growth does not outpace borrowing costs.
  
• Industry saturation in North America and slowing organic growth in core end markets suggest that without significant geographic or product expansion, WillScot may encounter decelerating revenue and EBITDA growth, particularly if new entrants or technological disruptions erode pricing and market share.

Valuation

• The assumed bullish price target for WillScot Holdings is $45.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of WillScot Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $28.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $2.8 billion, earnings will come to $439.4 million, and it would be trading on a PE ratio of 22.1x, assuming you use a discount rate of 9.4%.
• Given the current share price of $30.26, the bullish analyst price target of $45.0 is 32.8% 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.