Assessing Sterling Infrastructure After 100% Surge and New Highway Bill Momentum

If you have been following Sterling Infrastructure, you know the ride has been something worth talking about. Maybe you are wondering if this relentless climb is backed by fundamentals, or if the stock is getting a little ahead of itself. Let’s break it down in real terms. Over just the past week, Sterling shares fell by 5.0%. Zoom out for a clearer view and the returns are astonishing. The stock is up 18.2% over the last month and an impressive 104.0% year-to-date. Over the longer term, returns are even more striking, with a 2338.4% surge in the last five years. That is more than just market noise; it points to some big shifts in how investors are thinking about the company and the sector as a whole.

Much of this growth buzz comes amid broader optimism about public infrastructure spending and evolving transportation policies, which could open even more opportunities for companies like Sterling. Still, a rising share price tells only part of the story. To really figure out what is driving value here, we need a closer look at the numbers. According to our valuation score, Sterling comes in at just 1 out of 6, meaning it is only hitting one key metric for being considered undervalued. Before you jump in or cash out, let’s put these numbers under the microscope, walk through how different valuation approaches apply to Sterling, and explore whether there is a deeper angle to uncover at the end of this analysis.

Sterling Infrastructure scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Sterling Infrastructure Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today's dollars. This approach relies on how much actual money Sterling Infrastructure is expected to generate for shareholders in the years ahead.

Currently, Sterling's Free Cash Flow (FCF) stands at $423 million. Analyst estimates extend about five years out, with 2027's projected FCF at $380 million. Further projections, which stretch through 2035, are based on careful extrapolation. Over this ten-year horizon, FCF is expected to remain steady with modest growth, reaching about $438 million by 2035.

The DCF model, using these projections, arrives at an intrinsic value per share of $219.66. However, when we compare that to the current market price, it implies the stock is 55.7% overvalued. This means investors are paying far above what the company's future cash flows justify, at least by this measure.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sterling Infrastructure.

Our Discounted Cash Flow (DCF) analysis suggests Sterling Infrastructure may be overvalued by 55.7%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Sterling Infrastructure Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a preferred valuation metric for profitable companies like Sterling Infrastructure, as it compares a company's share price to its earnings per share. It offers insight into how much investors are willing to pay for each dollar of earnings. Generally, higher growth expectations or lower risk justify a higher PE ratio, while slower growth or greater risks call for a lower one.

Sterling Infrastructure currently trades at a PE ratio of 36.5x. For context, the average PE ratio among its industry peers is 55.8x, and the broader construction industry sits at around 34.5x. At first glance, Sterling appears more moderately valued than many of its peers.

However, Simply Wall St’s Fair Ratio brings greater nuance to the picture. This proprietary metric incorporates not just industry and peer comparisons but also company-specific factors such as earnings growth, profit margins, market cap, and risk profile. Rather than a one-size-fits-all comparison, the Fair Ratio offers a more holistic and tailored benchmark. For Sterling, the Fair Ratio stands at 32.4x, reflecting what investors should expect to pay considering both its strengths and risks.

When we compare Sterling’s actual PE of 36.5x to its Fair Ratio of 32.4x, the difference signals that the stock is trading somewhat above its fundamentally justified level. This suggests that optimism may be running a little ahead of reality.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sterling Infrastructure Narrative

Earlier, we mentioned there is an even better way to make sense of valuation, so let’s introduce you to Narratives. A Narrative is simply the story you build around a company, connecting your view or perspective with financial forecasts. This includes your own estimates of future revenue, margins, and a fair value for the stock. Narratives let you link Sterling Infrastructure's real-world business drivers to a clear financial outlook by turning numbers into a story that is meaningful for you.

On Simply Wall St’s Community page, millions of investors use Narratives as an accessible and practical way to decide whether to buy, hold, or sell by comparing their Fair Value with the current price. Narratives are not static. They are dynamically updated as new news, events, or earnings become available, so your view evolves with the facts.

For example, with Sterling Infrastructure, one investor’s Narrative might forecast cautious growth and lower future margins, leading them to set a Fair Value of $254 per share. Another investor might forecast aggressive expansion and robust margin resilience, supporting a Fair Value as high as $355 per share. Narratives empower you to bring your own convictions and expectations into the investment process, making smarter, more informed decisions easier than ever.

Do you think there's more to the story for Sterling Infrastructure? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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