Dycom (DY): 3 Reasons We Love This Stock

The past six months have been a windfall for Dycom’s shareholders. The company’s stock price has jumped 42.7%, hitting $366.38 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Following the strength, is DY a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.

Why Are We Positive On Dycom?

Working alongside some of the most popular mobile carriers in the world, Dycom (NYSE:DY) builds and maintains telecommunications infrastructure.

1. Long-Term Revenue Growth Shows Strong Momentum

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. Luckily, Dycom’s sales grew at a solid 10.2% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers.

2. 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.

Dycom’s operating margin rose by 5.9 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 8.3%.

3. 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.

Dycom’s EPS grew at an astounding 33.3% compounded annual growth rate over the last five years, higher than its 10.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

These are just a few reasons Dycom is a high-quality business worth owning, and with the recent surge, the stock trades at 29× forward P/E (or $366.38 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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