3 Reasons We Love Sterling (STRL)

Sterling currently trades at $306.08 and has been a dream stock for shareholders. It’s returned 1,266% since January 2021, blowing past the S&P 500’s 82% gain. The company has also beaten the index over the past six months as its stock price is up 26.8% thanks to its solid quarterly results.

Is now still a good time to buy STRL? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Are We Positive On Sterling?

Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ:STRL) provides civil infrastructure construction.

1. Long-Term Revenue Growth Shows Strong Momentum

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Sterling’s sales grew at a solid 9.4% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

2. Increasing Free Cash Flow Margin Juices Financials

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.

As you can see below, Sterling’s margin expanded by 8.7 percentage points over the last five years. This is encouraging because it gives the company more optionality. Sterling’s free cash flow margin for the trailing 12 months was 16.2%.

3. New Investments Bear Fruit as ROIC Jumps

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. Fortunately, Sterling’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Final Judgment

These are just a few reasons why we think Sterling is an elite industrials company, and with its shares outperforming the market lately, the stock trades at 26× forward P/E (or $306.08 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More Than Sterling

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