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QTEK

QualTek Services NasdaqCM:QTEK Stock Report

Last Price

US$1.52

Market Cap

US$73.2m

7D

-4.4%

1Y

-84.6%

Updated

11 Aug, 2022

Data

Company Financials +
QTEK fundamental analysis
Snowflake Score
Valuation6/6
Future Growth1/6
Past Performance0/6
Financial Health0/6
Dividends0/6

QTEK Stock Overview

QualTek Services Inc. provides communications infrastructure, power grid modernization, and renewable solutions to telecommunications and utilities industries in North America.

QualTek Services Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for QualTek Services
Historical stock prices
Current Share PriceUS$1.52
52 Week HighUS$10.43
52 Week LowUS$0.97
Beta0
1 Month Change2.01%
3 Month Change-32.44%
1 Year Change-84.65%
3 Year Changen/a
5 Year Changen/a
Change since IPO-84.65%

Recent News & Updates

Aug 08

QualTek GAAP EPS of -$0.50 misses by $0.16, revenue of $184.2M beats by $12.11M

QualTek press release (NASDAQ:QTEK): Q2 GAAP EPS of -$0.50 misses by $0.16. Revenue of $184.2M beats by $12.11M. Shares -2.4% AH.

Jul 29

5G Rollout Now Underway - QualTek Provides Most Potential Upside

AT&T, Verizon, Comcast, T-Mobile, etc. are now ramping up wireless/5G as planned and this bodes well for QualTek, Dycom and MasTec. QualTek, Dycom and MasTec believe this is the beginning of a long cycle, all with historic backlogs and extremely positive multi-year outlooks as they ramp up. QualTek, Dycom and MasTec all look cheap given their record backlogs and growth potential, but QualTek has the most potential upside. AT&T and Verizon both seemed to underperform post earnings because they went over their projections for capital expenditures for Q2. These businesses capital expenditures are QualTek, Dycom and MasTec's revenue, which bodes well for Q2 earnings and beyond. AT&T (T), Verizon (VZ), T-Mobile (TMUS), Comcast (CMCSA), etc. are rolling out 5G and this has been several years in the making that is now finally ramping up. Three companies are positioned to capitalize on this multi-year secular growth trend: MasTec (MTZ), Dycom (DY) and QualTek (QTEK). All three are undervalued based on their growth potential and one is priced for bankruptcy. MasTec trades at 9.9x EV/EBITDA and Dycom trades at 11.7x EV/EBITDA and QualTek trades at 5x EV/EBITDA. It is my view that in the order of increasing risk/reward MasTec is worth $90+, Dycom is worth $115+ and QualTek is worth $10+ if you believe that they are all are currently ramping up their telco business and ride this 5G build. The broadband construction industry has predominantly been outsourced to third-parties like MasTec, Dycom and QualTek and bringing that capacity in-house doesn't change the economics of the build and so I expect that these three businesses are set to boom. Investment Thesis 50 million homes will be connected with fiber broadband in the next 5-10 years. If quarterly conference call statements are to be believed, organic revenue growth should be realized from upcoming and now happening catalysts for 5G, fiber and rural infrastructure deployments. There has been a long-awaited surge in spending for fiber, wireless and 5G deployments that I suspect is now getting rolling. The market seems to be over-discounting the reality that the spending is now upon us. The risk would be that there is a deep recession that somehow negatively impacts consumer spending for internet connectedness and mobility that would result in a slower roll out of 5G. All three of these companies, MasTec, Dycom, and QualTek have record company backlogs, but if underlying business trends change meaningfully spending could be cut back or pushed back or there could be resource bottlenecks that could delay. Those risks aside, business should be booming for the foreseeable future and these three companies are undervalued today and I think they could more than double in the next couple years if they're able to execute against their plans. MasTec MasTec Stock Price Chart (finviz) MasTec is Telco/Power/O&GPipe/Renewable. MasTec also has a record company backlog. MasTec's backlog is at $10.6B and is the first time they've ever exceeded $10B. MasTec trades at 23x earnings. MasTec projects 2022 EBITDA of $750M. This puts MasTec at EV/EBITDA of 9.9x. MasTec looks at 2022 as a transition year. I believe MasTec is worth $90+. Company insiders own over 20% of the float and MasTec's largest customer is AT&T (T) which is ramping up activity in wireless/5G as planned. MasTec's largest communications customers also include Verizon, T-Mobile and Dish -- all of which are increasing their activity. MasTec sees this as part of ramping up a long cycle. Non-Telco MasTec has other lines of business aside from Telco. MasTec dialed back 2022 guidance because of Oil and Gas slowdowns and because a project is being pushed back a couple quarters and so this should swing back next year. MasTec views Biden's solar executive order as beneficially as soon as next year. The supply chain is being impacted by inflation but progress is being made. There is a lot of potential in the future growth of wind energy based on new transmission routes being put into place to capture wind energy. Dycom Dycom stock price chart (finviz) Dycom is a pureplay telecom contractor. It's top 5 customers account for 2/3 of their total revenue. Dycom is forecasting $244M of EBITDA for 2022 and has a backlog of $5.5B, of which $2.9B is expected to be completed in the next 12 months. This puts Dycom's EV/EBITDA at around 11.7x. I think Dycom is worth $115+ and currently trades at $100. Dycom generated 21% organic revenue growth last quarter and industry tailwinds are starting to take root. AT&T is finally expanding their networks: Dycom (DY), an installer of fiber-optic wiring, is expected to get a boost as AT&T (T) and other phone companies finally expand their fiber-optic broadband networks. In addition, new government subsidies will expand broadband networks in rural areas. The company is repurchasing stock and is expecting to increase their margins moving forward despite inflation and a tight labor market. Margin Expansion Dycom expects that its margins will expand to north of 10% as the 5G rollout takes shape and the cycle gets underway. Dycom has a significant opportunity in rural utility moving forward as they undertake broadband initiatives. Dycom has been targeting longer-duration contracts where they can ensure that their labor costs are economical. QualTek QualTek Stock Price Chart (finviz) The stock seems to have bottomed now. Q2 Earnings are to be announced Monday, August 8, 2022 after COB. Since the company went public in February, it has been SPAC smashed as the market has switched to risk off. Hurricane season is in full swing and QualTek's recovery logistics line of business profits from rebuilding after hurricanes. The $2.2B 24 month backlog is worth $200M in EBITDA across the next two years by my rough napkin math. The market capitalization is $31M and there is $485M in debt and the company's last quarter of EBITDA was a measly $4M on $148M of revenue, but business is seasonal and Q2 and Q3 are their bigger quarters. DEBT/EBITDA is at about 5x, which is maximum capacity. I expect as the company works down its debt load the market capitalization will appreciate exponentially as right now it trades like a call option on the future of a business that is priced to fail which doesn't make sense given their record backlog. If the next two quarters exceed analyst expectations, you're potentially looking at a $10+ stock. Second Half Of 2022 Weighted AT&T is their largest customer and their build plan is second half weighted: Yeah. We do anticipate that and just want to add a nuance obviously AT&T is our largest customer, the visibility into their build plan is really second half weighted. So we may be a little bit above that. Margins should improve possibly beyond 20% in the second half of this year. The company should be hitting its stride right now in late July / early August. Yeah. So we're anticipating about 10% EBITDA margin in Telecom business and as we mentioned in prepared remarks, Christian, we anticipate those margins expanding back half of Q2 into Q3 where you're going to see a normalized run rate. Numbers were understandably weak in Q1 but they should show strength possibly in Q2. Q3 sounds like it will be ever stronger. This likely applies to all equally to QualTek and Dycom and partially to MasTec. Business is seasonal and strongest in summer. QualTek - Most Explosive Risk/Reward Of The Three I don't see any real significant financial problems with QualTek, but the valuation of the equity is so low that it appears the market is pricing bankruptcy as inevitable in the next quarter or two. My friends who have looked at this company seem to think that it is struggling financially and that it is on life support. Maybe there is something there that I am missing, but the company just went public via a SPAC at $10 which has subsequently collapsed to as low as $1. I can't tell the difference between an investor problem and a business problem until after a few quarters of earnings are reported --- we will know if business is booming or if the debt is crushing.

Shareholder Returns

QTEKUS ConstructionUS Market
7D-4.4%3.8%1.2%
1Y-84.6%11.0%-11.6%

Return vs Industry: QTEK underperformed the US Construction industry which returned 11% over the past year.

Return vs Market: QTEK underperformed the US Market which returned -11.6% over the past year.

Price Volatility

Is QTEK's price volatile compared to industry and market?
QTEK volatility
QTEK Average Weekly Movement18.9%
Construction Industry Average Movement6.1%
Market Average Movement7.9%
10% most volatile stocks in US Market17.0%
10% least volatile stocks in US Market3.2%

Stable Share Price: QTEK is more volatile than 90% of US stocks over the past 3 months, typically moving +/- 19% a week.

Volatility Over Time: QTEK's weekly volatility has increased from 13% to 19% over the past year.

About the Company

FoundedEmployeesCEOWebsite
20125,340Christopher Hiseyhttps://qualtekservices.com

QualTek Services Inc. provides communications infrastructure, power grid modernization, and renewable solutions to telecommunications and utilities industries in North America. The company operates through two segments, Telecom, and Renewables and Recovery Logistics. The Telecom segment engages in the installation, project management, maintenance, real estate, and site acquisition; fiber optic aerial and underground installation, fiber optic splicing, termination and testing, new installation, engineering, and fulfillment services to telecommunication companies; and electrical contracting, and utility construction and maintenance services to municipalities, electric membership cooperatives, and electric-utility companies.

QualTek Services Inc. Fundamentals Summary

How do QualTek Services's earnings and revenue compare to its market cap?
QTEK fundamental statistics
Market CapUS$73.15m
Earnings (TTM)-US$76.84m
Revenue (TTM)US$694.90m

0.1x

P/S Ratio

-0.5x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
QTEK income statement (TTM)
RevenueUS$694.90m
Cost of RevenueUS$583.63m
Gross ProfitUS$111.27m
Other ExpensesUS$188.11m
Earnings-US$76.84m

Last Reported Earnings

Jul 02, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-3.14
Gross Margin16.01%
Net Profit Margin-11.06%
Debt/Equity Ratio-837.1%

How did QTEK perform over the long term?

See historical performance and comparison