NFI Group (TSX:NFI) is the biggest bus and coach manufacturer in North America. It is also one of the most undervalued stocks on the Toronto Stock Exchange. The company’s shares are still down roughly 63% from peak levels. But here is the thing: NFI is not in trouble. It is recovering, and the numbers are starting to support my thesis.
I think NFI is an undervalued stock worth buying today and holding for years.
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What does NFI Group do?
NFI builds transit buses, motorcoaches, and low-floor cutaway vehicles. It sells to cities, transit agencies, and private operators across 13 countries.
It also has a massive aftermarket business that sells parts and services to keep those buses running long after delivery. That recurring revenue stream is a big reason why this company is worth watching closely. NFI’s installed base is roughly 100,000 units. Each of those vehicles is a future parts-and-service customer.
The aftermarket business posted a gross margin of nearly 29% in the first quarter of 2026, according to remarks made by Chief Financial Officer Brian Dewsnup during NFI’s May 8, 2026, earnings call.
The company operates 44 facilities globally and employs more than 9,000 people. It is, without question, a real and substantial business.
Q1 was a key turning point
In the first quarter of 2026:
- NFI delivered 978 equivalent units (EUs) and reported revenue of US$842 million.
- It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$86.1 million, up 37% year over year.
- Gross margins expanded 450 basis points year over year, landing at 15.7%.
President and CEO John Sapp explained that the business is seeing “continued improvement” in supply chain performance, that the seating supply issue that dragged on production is now largely behind them, and that April was “a very strong” month.
The company reaffirmed full-year 2026 guidance for adjusted EBITDA of US$370 million to US$410 million.
The bull case for the undervalued Canadian stock
NFI’s total backlog stands at US$13 billion, covering 15,228 EUs. Roughly 43% of that is in firm orders, and 57% is in options.
A significant portion of the backlog is already funded into 2027. Customers are converting those options into firm orders as they lock in funding under the U.S. Infrastructure Investment and Jobs Act (IIJA) before it expires in September 2026.
The longer-term pipeline is also compelling. NFI sees roughly 26,000 EUs in its customers’ five-year procurement plans, reflecting fleet replacement demand. These agencies are buying buses as existing fleets are aging and need replacing.
The North American bid universe currently stands at about 32,500 EUs, the pool of future contracts NFI competes for. The company’s book-to-bill ratio on a last-12-months basis was 109%, meaning it is winning more business than it is delivering.
NFI’s ARBOC low-floor cutaway business had a record first quarter, delivering 794 units. That was up 20% from the same period a year earlier. Demand for these smaller, accessible vehicles is strong and showing no signs of slowing. NFI is also relaunching its medium-duty Equess bus this year, which could further expand the ARBOC customer base.
Moreover, the company opened its new All-Canada Build facility in Winnipeg in late 2025. That facility adds five units of capacity per week. NFI is also expanding double-decker bus production in Las Vegas for the Alexander Dennis product line. Management expects at least 50 units per year out of that facility, targeting growing North American demand for double-deckers.
What is the NFI stock price target?
Analysts forecast NFI’s free cash flow to expand from $68 million in 2025 to $203.6 million in 2028. If the TSX stock is priced at 15 times forward FCF, it could surge 50% within the next 18 months. Based on consensus price targets, NFI stock trades at a 21% discount in June 2026.
