With a market cap of $2.98 billion, Dycom Industries, Inc. (DY) specializes in delivering contracting services to the telecommunications infrastructure and utility sectors within the United States. In addition, the company provides engineering services to telecommunications providers, as well as program and project management services.

DY reported its third-quarter results on November 21, 2023, surpassing analyst estimates. The company attributed its robust performance to change orders and the completion of several projects, resulting in a $26.50 million increase in contract revenues.

Furthermore, the company forecasts approximately $50 million in acquired contract revenues for the quarter ending on January 27, 2024. Additionally, the expected non-GAAP adjusted EBITDA as a percentage of contract revenues for the same period is anticipated to grow by 75 to 125 basis points compared to the quarter ending January 28, 2023.

Moreover, on August 23, DY acquired Bigham Cable Construction, Inc., which specializes in offering telecommunications construction services in the southeastern United States. This strategic acquisition enhances DY’s customer portfolio, extends its geographic reach, and bolsters its capacity to capitalize on growth prospects in rural broadband deployments.

In terms of price performance, the company’s shares have surged 25.7% over the past nine months and 20.1% over the past month to close the last trading session at $101.68.

Here are the factors that could affect DY’s performance in the near term:

Robust Financials

For the fiscal third quarter that ended on October 28, 2023, DY’s total contract revenues increased 8.9% from the prior-year quarter to $1.14 billion, while the company’s income before income taxes rose 62.5% from the year-ago value to $112.37 million.

Furthermore, during the same period, DY’s net income and EPS came in at $83.74 million and $2.82, up 55% and 56.7% year-over-year, respectively. Also, its non-GAAP adjusted EBITDA grew 45.6% from the year-ago value to $166.78 million.

Solid Historical Growth

Over the past three years, DY’s revenue and EBIT have grown at CAGRs of 9.1% and 42.2%, respectively. In addition, the company’s net income and EPS have improved at CAGRs of 100.5% and 105.3% during the same period, respectively.

High Profitability

The stock’s trailing-12-month CAPEX/Sales of 5.17% is 73.2% higher than the 2.98% industry average. Its trailing-12-month Return On Common Equity (ROCE) of 23.04% is 88.4% higher than the industry average of 6.90%. Furthermore, DY’s trailing-12-month asset turnover ratio of 1.67x is 108.7% higher than the 0.80x industry average.

Discounted Valuation

In terms of forward non-GAAP P/E, DY’s is trading at 13.58x, 21.5% lower than the industry average of 17.30x. Likewise, its forward EV/EBITDA multiple of 8.04x is 26.9% lower than the industry average of 9.65x. Furthermore, its forward non-GAAP PEG of 0.89x is 45.4% lower than the industry average of 1.63x.

POWR Ratings Exhibit Solid Prospects

DY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DY has a B grade for momentum justified by the stock currently trading higher than its 200-day moving average of $95.23 and 50-day moving average of $87.12, indicating an uptrend.

Within the A-rated Industrial - Services industry, DY is ranked #29 out of the 80 stocks.

Beyond what we’ve stated above, we have also rated the stock for Growth, Value, Stability, Sentiment, and Quality. Get all ratings of DY here.

Bottom Line

As DY showcases resilience and growth in its recent financial performance, the company emerges as a compelling consideration for investors seeking opportunities in the industrial sector. Moreover, considering the stock’s high profitability and exceptional performance in the third quarter, its discounted valuation adds an extra layer of attractiveness. Hence, the stock might be a solid buy now.

How Does Dycom Industries, Inc. (DY) Stack Up Against Its Peers?  

While DY has an overall grade of B, equating to a Buy rating, you may also check out these other stocks within the Industrial - Services industry: IES Holdings, Inc. (IESC), Koç Holding A.S. (KHOLY), and EMCOR Group, Inc. (EME), with an A (Strong Buy) rating. For exploring more Industrial - Services stocks, click here.    

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DY shares were trading at $103.05 per share on Wednesday morning, up $1.37 (+1.35%). Year-to-date, DY has gained 10.10%, versus a 20.36% rise in the benchmark S&P 500 index during the same period.

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