Public Transit Fare Hikes and the Quest for Undervalued Transportation Equities

The global push for sustainable urban mobility has collided with a fiscal reality: public transit agencies are grappling with aging infrastructure, workforce shortages, and the lingering effects of pandemic-era ridership declines. Yet, amid these challenges, fare hikes and infrastructure reinvestment are creating fertile ground for transportation equities. For investors, the question is no longer whether to bet on this sector, but which companies are best positioned to capitalize on the coming wave of reinvestment.

The Fiscal Cliff and the Case for Fare Hikes

According to the American Public Transportation Association (APTA), ridership in 2025 stands at 85% of pre-pandemic levels, with bus and demand-response services leading the rebound. However, fare revenue-a critical revenue stream-has not kept pace. APTA's 2024 survey revealed that 50% of agencies-and 71% of the largest-anticipate a "fiscal cliff" within five years, driven by declining ridership, exhausted emergency federal funds, and rising operational costs.

Fare hikes have emerged as a necessary but politically sensitive tool. For example, Keolis, a French multinational operating in North America and Europe, has leveraged fare adjustments and service expansions to bolster its financials. In 2024, the company reported €7.7 billion in revenue-a 9.6% increase from 2023-and a recurring operating profit (EBIT) of €169 million, according to Keolis' 2024 annual results. Its strategic focus on electrification (e.g., deploying electric buses in the Netherlands) and digital integration (e.g., a Level 3 MaaS app) positions it to capture both government contracts and environmentally conscious riders.

Infrastructure Investment: A Tailwind for Operators

The U.S. Department of Transportation's accomplishments overview notes that the $673.8 billion Infrastructure Investment and Jobs Act (IIJA) has injected capital into public transit, funding 4,600 new buses and rail upgrades. This spending is a boon for companies like VINCI Concessions, which manages toll roads and airports across 24 countries. In 2025, VINCI's Concessions segment reported a 3.2% revenue increase to €34.9 billion, with VINCI Airports seeing an 11% revenue surge driven by post-pandemic travel demand, according to VINCI's first-half 2025 results. The company's "Toolbox VINCI Concessions" initiative further underscores its commitment to transparency and operational efficiency, key attributes for investors seeking stable cash flows.

Meanwhile, regional players like MV Transportation and Systra are benefiting from localized reinvestment. MV Transportation, a U.S.-based provider of paratransit and fixed-route services, has expanded its footprint across North America, while Systra-recently backed by Latour Capital and Fimalac-has accelerated its global infrastructure projects, including high-speed rail and metro systems, according to Highways Today. These firms exemplify how niche operators can thrive by aligning with both public and private capital flows.

Identifying Undervalued Equities: A Strategic Lens

Though specific 2025 P/E and P/B ratios for these companies remain elusive, broader industry trends offer clues. The transportation sector's average P/E ratio hovers around 18–19, while rail and logistics firms trade at 18.4–19.11, according to FullRatio's PE ratios. Keolis, with its 2.2% EBIT margin and 3x leverage ratio, appears undervalued relative to peers, particularly given its aggressive expansion in North America (e.g., Boston rail contracts). Similarly, VINCI Concessions' 8.0% EBITDA growth in H1 2025 and robust order book of €71.3 billion suggest strong fundamentals, even if its stock lacks the hype of renewable energy plays.

Systra and MV Transportation, though less globally prominent, offer compelling risk-rebalance opportunities. Systra's acquisition by Latour Capital and Fimalac provides financial firepower for international growth, while MV Transportation's focus on tailored U.S. transit solutions aligns with IIJA-driven demand. Analysts at Goldman Sachs and UBS have maintained "Buy" ratings on VINCI since late 2023, citing its low-carbon infrastructure model, according to a MarketScreener consensus, but similar coverage for Keolis and Systra remains sparse-a potential gap for investors to exploit.

Risks and Considerations

The sector is not without headwinds. Workforce shortages and the Federal Transit Administration's 20% spare vehicle ratio requirement strain operational margins. Moreover, macroeconomic volatility-exacerbated by trade tensions and inflation-could delay infrastructure projects. However, companies with diversified geographies (e.g., VINCI's 70+ airports worldwide) and strong balance sheets are better insulated from these shocks.

Conclusion

Public transit fare hikes and infrastructure reinvestment are reshaping the transportation landscape. For investors, the key lies in identifying firms that combine operational resilience with strategic foresight. Keolis, VINCI Concessions, and Systra stand out for their innovation, geographic diversification, and alignment with sustainability goals. While valuation metrics remain opaque, their performance against industry benchmarks and analyst optimism suggest these equities are undervalued relative to their long-term potential. As cities race to modernize their transit systems, the winners will be those that can scale efficiently-and profitably.