The United States has a problem, and it’s going to take $1 trillion — and 25 years — to completely fix it.

Almost needless to say, that’s a huge opportunity for companies with a real solution to this amazingly large and still-growing challenge. Take your pick of the numbers that put the problem in perspective; any of them are alarming:

• Every day in the United States, more than 800 water mains (the large pipes that carry potable water to from utility companies to neighborhoods) break and require repair.
• Six billion gallons of fresh water are lost due to leaks every day in the United States.
• As costly and as frequent as broken water main repairs are, 90% of costs stemming from lost water are due to the corrosion of aging iron pipes.

Fluor (NYSE: FLR), Northwest Pipe (Nasdaq: NWPX) and Layne Christensen (Nasdaq: LAYN) are all well-known names fixing and upgrading the U.S.’s water infrastructure and water treatment plants. Fluor designs and builds, among other things, wastewater treatment facilities. Layne Christensen does the same. As its name would suggest, Northwest Pipe makes high-quality water pipes for all purposes ranging from diameters of half an inch to 13 feet.

All of them are attractive investments in their own right. None of those companies, however, has a water infrastructure solution that’s as viable or as cool as Aegion (Nasdaq: AEGN).

A Brilliant Idea
The traditional method of repairing and replacing an aging trunk-line water pipe is to dig up the old one and put in a new one. Problem: Such lines are usually several feet deep, and water service beyond that pipe’s flow must be shut down for several hours (if not several days) to replace them.

The total price tag to fix a main runs a few thousand dollars at a minimum, and tens of thousands in some cases.

A division of Aegion named Insituform has a cost-effective alternative to replacing water mains. Called InsituMain, this product is a flexible plastic sleeve that’s inserted laterally into an existing water pipe (without digging it up) and then steam-cured into place to form a hard shell on the inside of a main. The approach circumvents the need to dig up old water pipes, which is generally the costliest portion of main repairs.

Though still not as popular as the more mainstream method of fixing deteriorating mains, more and more municipal utility managers are recognizing Insituform’s advantages. It’s that growing demand that makes AEGN a compelling growth investment.

Right Time, Right Place
For the first six months of this year, revenue for Aegion’s water and wastewater pipe repair services was up 6% from the same period last year. It’s not a huge improvement, but it’s an improvement following a couple of years of declining revenue for Aegion’s water and wastewater division.

It’s also not a fluke. Over the past four quarters, Aegion’s backlog of water and wastewater projects has grown from $215 million to $265 million. Said another way, we’re finally starting to see a light at the end of the tunnel — a turnaround is underway.

For investors who’ve kept their finger on the pulse of water infrastructure spending, that turnaround may not be a complete surprise. To everyone else, however, there’s opportunity in those details.

According to the U.S. Census Bureau, water and sewer construction spending fell 11% in 2011  and was off by more than 4% last year. With the exception of the very minor conservation arena, that’s the biggest two-year spending decline among the six heavy construction categories monitored by the bureau. That spending is turning around now, however.

This year’s spending is projected to be roughly even with last year’s, and the industry should start to benefit from spending growth again in 2014. Aegion is on the leading edge of that spending rebound with a cutting-edge product, even if the market doesn’t yet recognize it. That’ll change sooner than later.

Risks to consider: While the need for a solution to America’s aging water infrastructure is very real, it’s not a high-profile one that easily garners political support or public funding. Water system upgrades are often the first projects put on the chopping block when public funds unexpectedly dry up. This can make for uneven long-term demand. Also, keep in mind that Aegion isn’t just a pure water-infrastructure play. Its other divisions could struggle even if the water repair division is doing well.

Action to take –> It’s admittedly not the sexiest of investment ideas, but what Aegion may lack in pizzazz it more than makes up for in reliability and marketability. With a forward price-to-earnings (P/E) ratio of 11.6 and a pipe solution that actually (and cost-effectively) works, Aegion could offer as much as a 30% upside to investors willing to hold it a year or longer.

P.S. Revitalizing America’s water infrastructure could take decades. If you have an even longer investing horizon, you should look at a report from my colleague Elliott Gue. He and his staff recently spent six months and did $1.3 million worth of research hunting for the absolute best stocks on the market — stocks worth holding “Forever.” To learn more about the “Forever” stocks that they uncovered — including some names and ticker symbols — click here.