Great Lakes Dredge & Dock trades at $11.28 per share and has stayed right on track with the overall market, gaining 25.5% over the last six months. At the same time, the S&P 500 has returned 23.2%.
Is there a buying opportunity in Great Lakes Dredge & Dock, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is Great Lakes Dredge & Dock Not Exciting?
We're cautious about Great Lakes Dredge & Dock. Here are three reasons we avoid GLDD and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Great Lakes Dredge & Dock’s sales grew at a sluggish 2.9% compounded annual growth rate over the last five years. This was below our standards.
2. EPS Growth Has Stalled
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Great Lakes Dredge & Dock’s flat EPS over the last five years was below its 2.9% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Cash Burn Ignites Concerns
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.
Great Lakes Dredge & Dock’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 9.9%, meaning it lit $9.87 of cash on fire for every $100 in revenue.
Final Judgment
Great Lakes Dredge & Dock isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 13.1× forward P/E (or $11.28 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d suggest looking at the most dominant software business in the world.
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