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Bull Of The Day: Sterling Construction (STRL)

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Sterling Construction (STRL - Free Report) is a Zacks Rank #1 (Strong Buy) that sports a B for Value and a B for Growth. This is a construction name that I believe will have strong 2021.  Let's take a deeper look at why this is a Zacks Rank #1 (Strong Buy) in this Bull of the Day article.

Description

Sterling Construction Company, Inc., a construction company, engages in the heavy civil construction, specialty services, and residential construction activities primarily in the southern United States,  The company was formerly known as Oakhurst Company, Inc. and changed its name to Sterling Construction Company, Inc. in November 2001. Sterling Construction Company, Inc. was founded in 1955 and is headquartered in The Woodlands, Texas.

Earnings History

I see two beats and two misses in the last four quarters. The good thing about that is the last two quarters were the beats… and they were bigger than the misses. There is a 17% average positive earnings surprise over the last year.

Estimate Revisions

The current quarter has slipped from 27 cent to 23 cents, but at the same time the full year number has moved from $1.50 to $1.55.

Next year is looking at $1.88 and I see an 8 cent increase over the last 60 days.

The Zacks Rank is most heavily impacted by the increase or decrease of the annual earnings estimates.

Valuation

I see a 12x forward PE and that comes after the company recently posted topline growth of 31%. I see expectations for the topline next year at about 22%, but that will probably increase over time. A 2x price to book is very low and I like to see that. Price to sales at 0.38x is not where I like to see it, but there is room for growth.

Operating margins are steadily improving for STRL, but they are somewhat thin. If we see margin expansion this stock should run… and run fast.

Chart

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