While the investing world is largely distracted by thoughts of Anthropic's potential $2 trillion IPO -- an event that's now looking likely to occur next month -- a far smaller player that has been benefiting from the AI build-out has been making gains out of the spotlight. Data center cooling provider Modine Manufacturing (MOD +1.29%) has flown under the radar, but you'll want to pay attention.
NYSE: MOD
Key Data Points
Modine transformed itself from an auto parts supplier into a thermal management company, providing technology that prevents data centers from overheating. The company's climate solutions segment is now its most powerful growth channel as it provides necessary components to hyperscalers.
In Modine's most recently reported quarter (its fiscal 2027 Q1), revenue climbed 28% year over year, but its data center sales rose by 90% to $348.6 million. The company's backlog more than doubled in the same time frame. Management raised its full-year guidance, and now projects that its data center revenue will top $2 billion in fiscal 2028.
Image source: Getty Images.
Shares are currently well below their 52-week high of $323, but the stock has still risen by more than 280% in the past three years. Its valuation is quite rich because of this incredible growth, with a trailing P/E ratio above 70. Still, Modine has multiyear agreements in the pipeline and room for further growth. And its forward P/E is a more reasonable 24.
Modine still looks like a justifiable buy for long-term investors. There are risks associated with short-term AI infrastructure build-out spending, as well as a high degree of customer concentration in its data center segment. Still, Modine offers a way to invest in the AI infrastructure trend without paying the sky-high valuation multiples currently commanded by chipmakers.
