Unveiling Sterling Infrastructure (STRL)'s Value: Is It Really Priced Right? A Comprehensive Guide
Sterling Infrastructure Inc (NASDAQ:STRL) experienced a daily loss of -8.96%, despite a 3-month gain of 22.18%. The company's Earnings Per Share (EPS) stands at 3.91. The question that arises is whether Sterling Infrastructure (NASDAQ:STRL) is significantly overvalued. This article provides a comprehensive valuation analysis that will help answer this question. We encourage you to read on for a detailed understanding of Sterling Infrastructure's financial position and market value.
Company Introduction
Sterling Infrastructure Inc is a construction company that specializes in heavy civil infrastructure construction and infrastructure rehabilitation, as well as residential construction projects. The company operates in three reportable segments namely, Transportation Solutions, E-Infrastructure Solutions, and Building Solution. The majority of the revenue is generated from E-Infrastructure Solutions. The company's current stock price is $70.5, with a market cap of $2.20 billion. Comparing this to the GF Value, an estimation of the fair value, will provide a deeper understanding of the company's value.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It is calculated based on historical multiples, the GuruFocus adjustment factor, and future estimates of business performance. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
Sterling Infrastructure's stock is estimated to be significantly overvalued based on the GuruFocus Value calculation. At its current price of $70.5 per share, Sterling Infrastructure has a market cap of $2.20 billion and the stock is estimated to be significantly overvalued. Because Sterling Infrastructure is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Sterling Infrastructure has a cash-to-debt ratio of 0.65, which ranks better than 50.25% of 1600 companies in the Construction industry. Based on this, GuruFocus ranks Sterling Infrastructure's financial strength as 7 out of 10, suggesting fair balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk. Sterling Infrastructure has been profitable 6 years over the past 10 years. Its operating margin of 10.37% is better than 76.35% of 1624 companies in the Construction industry. Overall, GuruFocus ranks Sterling Infrastructure's profitability as fair.
Growth is probably one of the most important factors in the valuation of a company. Sterling Infrastructure's 3-year average revenue growth rate is better than 74.02% of 1551 companies in the Construction industry. Sterling Infrastructure's 3-year average EBITDA growth rate is 53.8%, which ranks better than 92.33% of 1317 companies in the Construction industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. During the past 12 months, Sterling Infrastructure's ROIC is 11.06 while its WACC came in at 9.53.
Conclusion
Overall, Sterling Infrastructure (NASDAQ:STRL) stock is estimated to be significantly overvalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 92.33% of 1317 companies in the Construction industry. To learn more about Sterling Infrastructure stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
