What a fantastic six months it’s been for Limbach. Shares of the company have skyrocketed 60.5%, setting a new 52-week high of $150.01. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now still a good time to buy LMB? 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 Limbach Spark Debate?

Established in 1901, Limbach (NASDAQ: LMB) provides integrated building systems solutions, including mechanical, electrical, and plumbing services.

Two Positive Attributes:

1. Operating Margin Rising, Profits Up

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Limbach’s operating margin rose by 5.3 percentage points over the last five years. Its operating margin for the trailing 12 months was 8.2%.

2. 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.

Limbach’s EPS grew at an astounding 114% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.

One Reason to be Careful:

Long-Term Revenue Growth Flatter Than a Pancake

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Limbach struggled to consistently increase demand as its $532.9 million of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result, but there are still things to like about Limbach.

Final Judgment

Limbach’s positive characteristics outweigh the negatives, and after the recent surge, the stock trades at 36.1× forward P/E (or $150.01 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.

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