Dycom’s stock price has taken a beating over the past six months, shedding 53.3% of its value and falling to $213.42 per share. This may have investors wondering how to approach the situation.
Following the pullback, is this a buying opportunity for DY? Find out in our full research report, it’s free.
Why are we positive on DY?
Working alongside some of the most popular mobile carriers in the world, Dycom (NYSE:DY) builds and maintains telecommunications infrastructure.
1. Skyrocketing revenue shows strong momentum
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Dycom’s 17.5% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding long-term EPS growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Dycom’s EPS grew at 58.2% compounded annual growth rate over the last five years, higher than its 17.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Increasing free cash flow margin juices financials
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Dycom’s margin expanded by 6.4 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Dycom’s free cash flow margin for the trailing 12 months was 6.9%.
Final judgment
These are just a few reasons why we think Dycom is one of the best industrials companies out there. After the recent drawdown, the stock trades at 13.1× forward P/E (or $213.42 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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