Dycom Industries’ common shares will need to reach $237 to achieve average annual stock market performance of 9.0% over the next 6 years. Upper quartile performance will require a $279 Dycom Industries stock price by 2030. As reflected at the current price of $141, what future Dycom Industries operating performance is the market anticipating?
Executive Summary
- Key Dycom Industries characteristics: high profitability, above average expected growth, low stability, and low financial strength. A big positive influence on Dycom Industries’ valuation is its superior Profitability.
- Very high valuation, leading shareholder returns. Current valuation levels are very high relative to the Dycom Industries Peer Group. Recent market returns have significantly outperformed the Dycom Industries Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Dycom Industries shares should reach a level of $183 by 2030 — an 4.4% per year total shareholder return. A 2030 stock price of $237 would reflect median performance and a price of $279 would be required to reach upper quartile performance.
- Dycom Industries’ achieved growth is modestly above average. Historical growth has been high relative to the Dycom Industries Peer Group and forecasted growth is relatively average. EPS Growth has been superior. This factor has buoyed market perceptions of Dycom Industries. Dycom Industries’ historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity. Dycom Industries’ consensus growth expectations are lower than historical growth.
- Profitability is slightly above average. The company has high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Dycom Industries’ risk profile is neutral. Overall variability has been only average with only average revenue variability, very high E.P.S. variability, and above average stock price volatility. Financial Strength is very low and earnings’ expectations are relatively very high. The debt/capital ratio has risen.
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