2 Reasons to Like MYRG and 1 to Stay Skeptical

What a time it’s been for MYR Group. In the past six months alone, the company’s stock price has increased by a massive 86.3%, reaching $432.42 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now still a good time to buy MYRG? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Does MYR Group Spark Debate?

Constructing electrical and phone lines in the American Midwest dating back to the 1890s, MYR Group (NASDAQ:MYRG) is a specialty contractor in the electrical construction industry.

Two Positive Attributes:

1. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

MYR Group’s EPS grew at 17.4% compounded annual growth rate over the last five years, higher than its 10.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

2. Increasing Free Cash Flow Margin Juices Financials

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, MYR Group’s margin expanded by 4.5 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 while its operating profitability was flat. MYR Group’s free cash flow margin for the trailing 12 months was 6%.

One Reason to be Careful:

Weak Backlog Growth Points to Soft Demand

Investors interested in Construction and Maintenance Services companies should track backlog in addition to reported revenue. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into MYR Group’s future revenue streams.

MYR Group’s backlog came in at $2.84 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 5.8%. This performance was underwhelming and suggests that increasing competition is causing challenges in winning new orders.

Final Judgment

MYR Group’s positive characteristics outweigh the negatives, and with the recent rally, the stock trades at 39.9× forward P/E (or $432.42 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

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