Last week, we visited Federal Signal’s flagship manufacturing facility alongside a select group of investors. Touring the plant floor, seeing the latest innovations in action and engaging directly with the teams driving Federal Signal’s record-setting growth gave us invaluable insights that numbers alone can’t provide. This on-the-ground approach reflects our commitment to deep diligence and transparency – values that set us apart in the investment community.
Our group witnessed not only the impressive scale of production, but also the operational excellence and culture of continuous improvement that permeate every corner of the company. From the hum of new automated machinery to the pride in the eyes of long-tenured employees, the visit reaffirmed why Federal Signal remains a leader in its field and a valuable investment.
Vactor Manufacturing production plant in Streator, IL. Source: Global Alpha.
A truck outside the Vactor Manufacturing production plant. Source: Global Alpha.
Another section of the production plant, highlighting other brands produced by Federal Signal. Source: Global Alpha.
A specialized truck produced by Federal Signal. Source: Global Alpha.
Who is Federal Signal?
Federal Signal Corp. (FSS NY) makes specialized vehicles and equipment that help keep communities safe, clean and running smoothly. In simple terms, the company builds things like street sweepers, sewer-cleaning trucks, fire rescue vehicles and emergency warning systems. Their products are used by cities, governments and businesses to clean streets, manage waste, respond to emergencies and alert people to danger.
Federal Signal: A platform built for power and agility
Federal Signal’s story is one of transformation and resilience. Over the past decade, the company has built a powerful platform that combines organic growth, strategic acquisitions and a robust aftermarket business. Since 2016, net sales have grown at a compound annual rate of 13%, reaching a record $1.86 billion in 2024. The company’s ability to scale quickly has been critical in overcoming challenges and seizing new opportunities.
Inside the plant: Innovation, efficiency and teamwork
During our visit, we saw firsthand how Federal Signal’s operational strategies translate into real world results:
Production efficiency: The Streator, Illinois facility set a new record for unit production in 2024, thanks to improved supply chains and process enhancements.
Lean initiatives: The Federal Signal Operating System, including 80/20 programs and lean manufacturing, is driving efficiency, cost savings and reduced lead times across the organization.
Electrification and new product development: The company continues to invest in electrification, with new offerings like the fully electric Broom Bear street sweeper and Rugby Vari-Class dump platform.
Safety and security: The Safety and Security Systems Group (SSG) posted a 7% sales increase, with EBITDA margins rising by 170 basis points, reflecting strong demand for public safety equipment and operational discipline.
These achievements are not abstract – they are visible on the plant floor, in the streamlined workflows and in the pride of the workforce.
Strategic growth: M&A and aftermarket expansion
Federal Signal’s disciplined approach to mergers and acquisitions (M&A) has been a key driver of its growth. Since 2016, about half of top-line growth has come from M&A, with a focus on integrating and strengthening acquired businesses. The recent acquisition of Hog Technologies, a leader in road marking and water blasting equipment, expands Federal Signal’s reach into new geographies and end-markets, such as airports.
The company’s aftermarket business – parts, service, rentals and training – continues to expand, providing stable, recurring revenue and deeper customer relationships. This diversification of revenue streams helps buffer the company against economic cycles and positions it for long-term sustainability.
Positioned for the future: Resilience and opportunity
Federal Signal’s future is bright, supported by a robust backlog, a healthy M&A pipeline and a diversified customer base. The company is well-positioned to benefit from ongoing infrastructure investment, including federal stimulus funds and the bipartisan Infrastructure Bill, which are driving demand for essential equipment like sewer cleaners, street sweepers and safe digging trucks.
A key differentiator is Federal Signal’s ability to adapt – whether by bringing more production in-house, optimizing distribution or leveraging cross-selling opportunities among its brands. The company’s platform approach ensures that every new acquisition and product line strengthens the whole.
What sets Global Alpha apart: The value of being there
Our recent plant visit is more than a symbolic gesture – it’s a core part of our investment philosophy. By engaging directly with Federal Signal’s people and processes, we gain a nuanced understanding of the company’s strengths and opportunities that goes beyond financial statements. This hands-on diligence gives us – and our investors – confidence in the company’s trajectory and our decision-making.
In a world where many rely solely on remote analysis, our willingness to “walk the floor” sets us apart. It’s how we build conviction, spot emerging trends early and ensure we’re investing alongside the best teams in the business.
Conclusion: Moving forward together
Federal Signal’s journey is one of continuous growth, innovation and resilience. As we saw firsthand this week, the company’s success is driven by a powerful platform, a culture of excellence and a commitment to serving customers and communities.
We are excited to continue this journey with you – on the ground, in the field, and at the forefront of industry leadership. Thank you for your trust and partnership.