Shares of Sterling Infrastructure (STRL) have been strong performers lately, with the stock up 27.5% over the past month. The stock hit a new 52-week high of $203.49 in the previous session. Sterling Infrastructure has gained 126.4% since the start of the year compared to the 29.7% move for the Zacks Construction sector and the 19.2% return for the Zacks Engineering - R and D Services industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 6, 2024, Sterling Infrastructure reported EPS of $1.97 versus consensus estimate of $1.68.
For the current fiscal year, Sterling Infrastructure is expected to post earnings of $5.96 per share on $2.15 billion in revenues. This represents a 33.33% change in EPS on a 9.02% change in revenues. For the next fiscal year, the company is expected to earn $6.45 per share on $2.31 billion in revenues. This represents a year-over-year change of 8.14% and 7.34%, respectively.
Valuation Metrics
Sterling Infrastructure may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Sterling Infrastructure has a Value Score of D. The stock's Growth and Momentum Scores are A and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 33.4X current fiscal year EPS estimates, which is a premium to the peer industry average of 23.6X. On a trailing cash flow basis, the stock currently trades at 31X versus its peer group's average of 17X. Additionally, the stock has a PEG ratio of 2.23. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Sterling Infrastructure currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Sterling Infrastructure fits the bill. Thus, it seems as though Sterling Infrastructure shares could have a bit more room to run in the near term.
How Does STRL Stack Up to the Competition?
Shares of STRL have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is M-tron Industries, Inc. (MPTI). MPTI has a Zacks Rank of # 2 (Buy) and a Value Score of D, a Growth Score of A, and a Momentum Score of C.
Earnings were strong last quarter. M-tron Industries, Inc. beat our consensus estimate by 50%, and for the current fiscal year, MPTI is expected to post earnings of $2.35 per share on revenue of $48.8 million.
Shares of M-tron Industries, Inc. have gained 26% over the past month, and currently trade at a forward P/E of 26.93X and a P/CF of 42.75X.
The Engineering - R and D Services industry may rank in the bottom 59% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for STRL and MPTI, even beyond their own solid fundamental situation.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Sterling Infrastructure, Inc. (STRL) : Free Stock Analysis Report
M-tron Industries, Inc. (MPTI) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
