Parsons Corporation (PSN): A Small-Cap Gem in Rob Citrone’s High-Stakes Infrastructure Play

Eli GrantFriday, May 9, 2025 8:39 am ET
26min read

In a market brimming with volatility and geopolitical tension, billionaire investor Rob Citrone has quietly positioned himself behind a handful of small-cap stocks he believes will outperform in 2025. Among them is Parsons Corporation (PSN), a $2.2 billion engineering and technical services firm that’s emerging as a linchpin in the global push for infrastructure modernization and defense spending.

Why Citrone Is Betting on PSN

Citrone, founder of Discovery Capital Management—a Tiger Cub hedge fund with a 373% return since 2014—selected PSN as one of his top 10 small-cap picks for its “huge upside potential.” The firm’s methodology prioritizes companies with $1–10 billion market caps, strong valuation multiples, and alignment with sectors like infrastructure, defense, and energy—all areas where Parsons excels.

Parsons’ recent Q1 2025 results underscore Citrone’s confidence. The company reported a record $9.1 billion backlog (up 14% year-over-year) and a $243 million contract win for defense-related technology solutions. CEO Carey Smith has doubled down on critical infrastructure—a segment that grew 14% in Q1—while expanding into renewable energy projects and cyber defense.

The Financial Case for PSN

Parsons’ FY 2025 guidance is ambitious but achievable:
- Revenue: $7.0–7.5 billion (up from $6.5 billion in 2024).
- Adjusted EBITDA: $640–710 million (margin expansion to 9.6%).
- Cash flow: $420–480 million, supporting its $250 million share repurchase program.

The stock has already climbed from $150 in 2023 to a 52-week high of $180 in late 2024, driven by execution on large contracts and strategic acquisitions like the $37 million TRS Group buy, which expanded its environmental remediation capabilities.

Citrone’s Playbook: Caution Amid Opportunity

While Citrone sees PSN’s upside, he’s tempering his overall risk. By January 2025, he had cut his equity exposure to 25%, anticipating a 5–7% market correction due to elevated valuations and U.S. trade policy uncertainty. Yet PSN remained in his portfolio—a sign of its defensive profile.

The company’s balance sheet reinforces this:
- Debt-to-equity ratio: 0.5x (conservative for its sector).
- Funded backlog: A record $6.8 billion, ensuring visibility for future revenue.

Risks on the Horizon

Parsons isn’t without vulnerabilities. Its Federal Solutions segment saw a 7% revenue decline in Q1 due to expiring contracts, and margin pressures persist in cost-type programs. Meanwhile, geopolitical risks—like U.S.-China trade disputes—could disrupt global infrastructure projects.

Why This Matters for Investors

Citrone’s contrarian approach—buying into PSN as broader markets falter—reflects a bet on structural trends. The U.S. alone faces a $2.6 trillion infrastructure investment gap by 2029, per the American Society of Civil Engineers. Parsons’ expertise in nuclear energy, LNG exports, and AI-driven data center infrastructure positions it to capitalize on this demand.

The CEO’s shareholder-friendly moves—$225 million remaining in buybacks and a $37 million acquisition to boost margins—add further value.

Conclusion: PSN’s 2025 Upside Potential

Parsons Corporation checks all the boxes for Citrone’s strategy: a small-cap stock with strong backlog, exposure to high-growth infrastructure sectors, and a management team executing on ambitious targets. At current levels, PSN trades at 12.4x forward EBITDA, a discount to peers like AECOM (22x) and Fluor (18x).

With a $250 million buyback program and a backlog that could support 20% annual revenue growth, PSN’s stock could climb to $220–$250 by end-2025—a 22–40% gain from recent prices.

However, investors must weigh the risks. If trade tensions escalate or defense budgets shrink, PSN’s momentum could stall. Still, with Citrone’s track record and Parsons’ strategic moat in critical infrastructure, this small-cap stock is a compelling bet for those willing to navigate near-term turbulence.

In a market where infrastructure is the new battleground, Rob Citrone’s pick isn’t just a stock—it’s a stake in the future of global engineering.