2024-04-20 00:36:37 ET
Summary
- Sterling's business structure became indeed more balanced and less dependent only on the E-Infrastructure Solutions segment, while the margin expansion led to a 50.5% YoY increase in EBIT.
- The company's FCF is steadily and gradually increasing and currently accounts for about 21% of annual sales, which is quite a lot.
- I believe there's still uncovered growth upside for margin expansions: the current 14% EBITDA margin, theoretically, is far from its limit.
- If the expansion continues, reaching at least 17-18%, the stock may be significantly undervalued at its current valuation. So, based on the above, I reiterate my previous "Buy" rating today.
Introduction
I initiated coverage of Sterling Infrastructure, Inc ( STRL ) stock in July 2023 when 1 share was trading at $59.11. Today, STRL trades at $98.32 and has since strongly beaten the broader market thanks to its quality business growth (i.e. growth of the top line against a backdrop of margin expansion). The last time I looked at STRL's business was in early January 2024 and concluded that the company's qualitative growth is continuing and that the stock will most likely follow suit - and the market has indeed rewarded Sterling:
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For further details see:
Sterling Infrastructure Stock: Why I'm Still Bullish