When it comes to the construction industry, Sterling Infrastructure (STRL) stands out as a top contender. Despite the overall underperformance of the real estate sector, Sterling Infrastructure has managed to maintain a strong position in the market. With historically high rates, tight supplies, and consumers hesitant to make purchases after locking in low rates during the pandemic, the real estate sector has faced numerous challenges. However, the demand for construction-related stocks remains strong, presenting opportunities for investors.
Sterling Infrastructure has seen impressive growth in recent years, with its share value tripling over the past year. This success can be attributed to the company’s involvement in infrastructure projects. As more homebuyers opt to build from the ground up rather than engage in bidding wars, construction-related stocks like Sterling Infrastructure have experienced significant momentum. Despite temporary setbacks, such as a 15% intraday drop in October, the company’s fundamentals and strong outlook have positioned it as a top stock to consider for investment portfolios.
Sterling Infrastructure, Inc. (STRL): An Overview
- Market Capitalization: $2.21B
- Quant Rating: Strong Buy
- Quant Sector Ranking (as of 10/20/23): 6 out of 654
- Quant Industry Ranking (as of 10/20/23): 3 out of 34
Sterling Infrastructure specializes in E-infrastructure and large-scale site development for data centers, transportation, and building solutions. The company has a track record of delivering impressive top-line growth and expanding margins. With a focus on differentiated, higher-margin highway construction and engineering, Sterling Infrastructure has positioned itself as a leader in the industry.
Sterling Infrastructure’s Valuation and Momentum
Despite its bullish momentum, with a YTD price performance of +109% and +183% over the last year, Sterling Infrastructure maintains a discounted valuation. Its forward PEG ratio is 0.88x compared to the sector median of 1.61x, and its forward Price/Sales is at a 13% discount to the sector. With its strong price performance and positive momentum, there is potential for upside in STRL stock.
Sterling Infrastructure’s Growth and Profitability
Sterling Infrastructure is well-positioned for growth, particularly in the expanding trend of vehicle electrification. The company has secured significant projects, including an EV battery facility for Hyundai and a site development contract for Rivian’s Georgia EV facility. With nine consecutive earnings beats, strong cash flow, and a growing backlog, Sterling Infrastructure’s growth and profitability are on an upward trajectory.
Potential Risks
While Sterling Infrastructure presents strong investment potential, it’s essential to consider potential risks. Supply chain constraints and macroeconomic challenges, such as higher interest rates and costly raw materials, can impact the construction industry. Labor shortages and safety hazards also pose risks. However, Sterling Infrastructure has a strong safety record and prioritizes the well-being of its employees.
Conclusion: Why Sterling Infrastructure (STRL) Stands Out
Despite the volatility in the industrials sector, Sterling Infrastructure stands out as a top construction stock due to its impressive valuation, growth, profitability, momentum, and positive EPS revisions. The company’s strong backlog, high-margin projects, and focus on innovation and diversification contribute to its financial strength. As one of the best-performing construction and engineering stocks, Sterling Infrastructure offers long-term investment potential in an industry that plays a vital role in driving the U.S. economy.
If you’re interested in exploring more investment opportunities in the industrial sector, consider checking out our top industrial stocks or Alpha Picks, which provide a curated selection of the best quant stocks on a monthly basis.
