This Former Small-Cap Darling Is in Freefall, But I Like the Stock Here

Tech stocks led Tuesday’s selloff as the Nasdaq Composite fell 1.33%, followed by a 0.69% decline for the S&P 500, and a 0.22% correction for the Dow Jones Industrial Average. 

One reason for the selloff: U.S. 30-year Treasury bond yields hit a new 19-year high. That’s not good news for the U.S. government, which has already paid out $1.2 trillion in interest on its nearly $40 trillion in debt in 2026. 

As a Canadian, it’s interesting to note that the interest paid by the U.S. government year-to-date is about the same as the Canadian federal government’s total debt outstanding. But I digress. 

One way to tell the markets have cooled without looking at the various indices’ performance is to check the new 52-week highs and lows. 

In Tuesday’s trading, both the NYSE -- 60 new 52-week highs to 175 new 52-week lows -- and the Nasdaq Composite -- 125 new 52-week highs to 189 new 52-week lows -- had more lows than highs. I can’t remember the last time this happened. 

It’s worth noting that many of the new 52-week lows on the NYSE were preferred shares, bonds, or debentures. Makes sense given the 30-year Treasury bond, so the indicator’s probably not nearly as strong as it would be without those. 

Among the 189 new 52-week lows yesterday was Limbach Holdings (LMB). This Florida-based small-cap stock provides building systems solutions to healthcare, industrial and manufacturing, data centers, life sciences, higher education, and cultural and entertainment markets.

The company’s stock has cooled off significantly since hitting an all-time high of $154.05 on June 30, 2025. 

Buy or Sell? I’ll consider both sides of the argument.

I Liked Limbach in 2023

In June 2023, I included Limbach among a trio of stocks I liked in Barchart’s Top 100 Stocks to Buy. 

Founded in 1901 in Pittsburgh, it’s had an eclectic and interesting history, culminating in its July 2016 merger with 1347 Capital Corp., one of the early SPACs (special purpose acquisition companies).  

By the time I found Limbach in June 2023, it had already gained 114% year-to-date, but it went on to gain another 589% over the next 25 months before cooling off in 2025.

My rationale for liking the business was its move from the GCR (general contractor relationships) segment to the ODR (owner-direct relationships) segment, which caters to building owners. 

In Q1 2023, the ODR segment accounted for 48.5% of Limbach’s revenue; in Q2 2026, the ODR segment contributed 74% of its revenue, growing by 17.9 percentage points year-over-year. 

I write about retail a lot, so Limbach’s two-segment business model seems very familiar. In retail, growing apparel brands tend to build a strong DTC (direct-to-consumer) business, whether through online sales, brick-and-mortar retail locations, or both. It’s possible, as is the case with Nike (NKE), that you neglect the wholesale trade to the detriment of the entire business. 

At the end of 2022, the split between ODR and GCR was 43.6% and 56.4%, respectively. In 2023, the split was 50.7%/49.3%; in 2024, 66.6%/33.4%; and through the first six months of 2026, 73.1%/26.9 %.  

While I like the ODR business model, I think it’s important that Limbach maintains a strong connection to the general contractor community. While the GCR segment’s trailing 12-month gross profit margin as of June 30 was 20.9%, 360 basis points below the ODR segment, it brings new ODR relationships to the table through general contractors’ contacts with building owners. It’s a fine line. I wouldn’t want to see the split get much below 75%/25%. 

In the Q2 2026 conference call, the company noted that it had lowered its 2026 guidance for the percentage of revenue generated by the ODR segment from 77.5% at the midpoint to 75% -- due to it pursuing more data center and industrial GCR opportunities --  suggesting that a 75%/25% split is the right mix for the overall growth of the business.

I couldn’t agree more. 

What’s Got Limbach Stock in Freefall

Limbach’s Q2 2026 revenue of $173.5 million missed the analysts’ year-over-year growth estimate of 24.0% by 210 basis points. On the bottom line, adjusted EPS was $0.64, 29 cents below Wall Street’s estimate.

While those misses are notable, margin erosion has really spooked investors. The word “margin” was mentioned 45 times in the quarterly conference call. 

JPMorgan analyst Tomohiko Sano asked about the gross margin profiles, especially from two of its most recent acquisitions—Pioneer Power for $65.7 million in July 2025 and the Aug. 4, 2026, purchase of Cymcor for $30 million.

Pioneer was acquired to grow its ODR business in the Midwest. In contrast, Cymcor’s GCR business helps Limbach accelerate the development of a data center platform similar to what it’s built in health care. 

The risk to investors is that integrations into Limbach don’t go smoothly, leading to lower margins and, more importantly, taking management’s eye off the ball as it works to fix the integration issues. 

CEO Michael McCann said that it should bring Pioneer Power’s gross profit margins in line with the company average within 24 to 36 months. As for Cymcor, it’s obviously very recent, so it’s too early to know. Still, McCann did say that it expects Cymcor to generate “$12 million of program management revenue, and $4 million of adjusted EBITDA in 2027.” More importantly, it believes Cymcor will add considerable value in its push into the data center market. 

As a result of lower gross margin, net income, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the second quarter, shares have fallen 44% since the announcement before markets opened on Aug. 4. That’s brought out the ambulance chasers looking to cash in on a class action lawsuit. 

While investors who bought Aug. 3 should be upset, the market doesn't take kindly to misses. There’s not much you can do about it except to buy put options before the earnings event to protect the downside. 

Buy or Sell Limbach Stock on the Dip?

If you’re an aggressive investor, it’s fair to say Limbach’s business model is bent, not broken, creating an opportunity to buy the stock at a level not seen since April 2024. 

If you’ve owned LMB stock since before Aug. 4, its shares have fallen in eight of the last 11 trading days. The 14-day relative strength index is 25.88, below 30, which suggests it’s been oversold. 

Further, it’s important to note that two other climate-related stocks hit new 52-week lows yesterday -- Lennox International (LII) and Madison Air Solutions (MAIR) -- so there’s no question that this type of stock is not getting the love from investors. 

I like Limbach stock here. Whether it executes over the next 24-36 months as it did between 2023 and 2025 remains to be seen.