MYR Group (MYRG): Buy, Sell, or Hold Post Q1 Earnings?

MYR Group currently trades at $189.56 and has been a dream stock for shareholders. It’s returned 473% since July 2020, blowing past the S&P 500’s 94% gain. The company has also beaten the index over the past six months as its stock price is up 28.3% thanks to its solid quarterly results.

Is there a buying opportunity in MYR Group, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think MYR Group Will Underperform?

Despite the momentum, we're cautious about MYR Group. Here are three reasons why there are better opportunities than MYRG and a stock we'd rather own.

1. Backlog Is Unchanged, Sales Pipeline Stalls

We can better understand Construction and Maintenance Services companies by analyzing their backlog. 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.

Over the last two years, MYR Group failed to grow its backlog, which came in at $2.37 billion in the latest quarter. This performance was underwhelming and shows the company faced challenges in winning new orders. It also suggests there may be increasing competition or market saturation.

2. EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for MYR Group, its EPS declined by 34.5% annually over the last two years while its revenue grew by 3%. This tells us the company became less profitable on a per-share basis as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, MYR Group’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

MYR Group doesn’t pass our quality test. With its shares beating the market recently, the stock trades at 30.2× forward P/E (or $189.56 per share). This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere. Let us point you toward one of Charlie Munger’s all-time favorite businesses.

Stocks We Would Buy Instead of MYR Group

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