3 Reasons to Avoid GLDD and 1 Stock to Buy Instead

What a fantastic six months it’s been for Great Lakes Dredge & Dock. Shares of the company have skyrocketed 41.2%, hitting $16.92. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now the time to buy Great Lakes Dredge & Dock, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Great Lakes Dredge & Dock Not Exciting?

We’re glad investors have benefited from the price increase, but we're swiping left on Great Lakes Dredge & Dock for now. Here are three reasons you should be careful with GLDD and a stock we'd rather own.

1. Weak Backlog Growth Points to Soft Demand

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 Great Lakes Dredge & Dock’s future revenue streams.

Great Lakes Dredge & Dock’s backlog came in at $1.01 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 4.2%. This performance was underwhelming and suggests that increasing competition is causing challenges in winning new orders.

2. Low Gross Margin Reveals Weak Structural Profitability

For industrials businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Great Lakes Dredge & Dock has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 16.9% gross margin over the last five years. That means Great Lakes Dredge & Dock paid its suppliers a lot of money ($83.07 for every $100 in revenue) to run its business.

3. Cash Burn Ignites Concerns

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.

While Great Lakes Dredge & Dock posted positive free cash flow this quarter, the broader story hasn’t been so clean. Great Lakes Dredge & Dock’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 9.4%, meaning it lit $9.43 of cash on fire for every $100 in revenue.

Final Judgment

Great Lakes Dredge & Dock’s business quality ultimately falls short of our standards. Following the recent rally, the stock trades at 15.1× forward P/E (or $16.92 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at the most dominant software business in the world.

Stocks We Would Buy Instead of Great Lakes Dredge & Dock

ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.

Find out which 5 stocks it's flagging for this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.