Should You Reassess Sterling Infrastructure After Shares Fall 9% Despite Continued Growth?

If you have been following Sterling Infrastructure, you know this stock has been anything but boring. After an incredible multi-year run that saw shares skyrocket over 2,200% in five years, Sterling’s recent price dips—down 9.4% in the last month and 8.9% this past week—might have you wondering if the party is over or if there is still real growth ahead.

So, what’s causing the turbulence? Recent headlines have highlighted Sterling’s steady expansion into new civil and infrastructure projects, showing no signs of slowing on ambitious plans. Yet, broader market jitters about interest rates and construction sector headwinds have clearly shifted risk perceptions in the short term. Still, if you zoom out, the stock is up 98.4% year-to-date and has more than doubled in the past year alone. That is rapid growth by nearly any measure.

But price action is only one piece of the puzzle. Investors want to know if this momentum makes the stock more attractive or simply riskier now. On a valuation basis, Sterling Infrastructure currently scores a 1 out of 6 using traditional undervaluation checks, which indicates the market may already recognize much of the company’s success.

Let’s break down what those valuation checks really mean, whether they’re telling the whole story, and look for a smarter way to assess Sterling’s true worth before making your next move.

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

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s dollars. This approach helps investors understand what the business is fundamentally worth, based on its ability to generate cash in the years ahead.

Sterling Infrastructure currently reports a Free Cash Flow (FCF) of $423.5 million. Analyst forecasts extend out five years and see FCF peaking at $403.4 million in 2026 and $380.3 million in 2027. Beyond those dates, further projections are extrapolated. The model anticipates annual FCFs remaining in the $379 to $438 million range through 2035. All projections are in USD.

Based on this 2 Stage Free Cash Flow to Equity model, the estimated fair value for Sterling Infrastructure is $219.05 per share. However, the stock is currently trading 51.9% above this intrinsic value, suggesting it is significantly overvalued according to these cash flow assumptions.

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 51.9%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Sterling Infrastructure Price vs Earnings

For profitable companies like Sterling Infrastructure, using the Price-to-Earnings (PE) ratio is a tried and tested way to gauge valuation. The PE ratio tells investors how much they are paying for each dollar of current earnings, making it particularly useful when a company is generating steady profits.

However, not all PE ratios are created equal. Growth expectations and risk play a big part in what counts as a “normal” or “fair” PE. Fast-growing, lower-risk companies typically command higher PE multiples, while slower or riskier businesses may deserve to trade at a discount.

Sterling Infrastructure currently trades at a PE ratio of 35.52x. This is above the Construction industry average of 32.60x, but still below the average of its peers at 47.38x. At first glance, this puts Sterling somewhere in the middle, neither the cheapest nor the most expensive in its space.

Simply Wall St's “Fair Ratio” is a calculation of the PE multiple a stock deserves, taking into account factors like earnings growth, profit margins, its specific industry, market cap, and risk profile. This is a more objective benchmark than just looking at industry or peer averages because it’s tailored to the company’s unique outlook and not just a one-size-fits-all number.

Sterling’s fair PE ratio is calculated at 34.93x, which closely matches the current PE of 35.52x. This small difference suggests the stock is trading at a price nearly justified by its fundamentals and prospects.

Result: ABOUT RIGHT

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 that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personal story or perspective of a company, connecting what you believe about Sterling Infrastructure, its future revenue, earnings, and margins, to a clear financial forecast and a fair value estimate.

Narratives bridge the company's business outlook with its numbers, helping you see how your expectations compare to reality. On Simply Wall St’s platform, Narratives are easily accessible on the Community page and are used by millions of investors to quickly capture and update their view when new news or earnings arrive.

This tool makes buy or sell decisions more straightforward by letting you compare your calculated Fair Value to the current Price, while ensuring your thinking automatically incorporates the latest information. For example, some Sterling investors see risks ahead, with low margin forecasts and a fair value of $254, while others expect continued outperformance, projecting robust growth and a fair value up to $355. Narratives give you a flexible and dynamic framework to make smarter investment choices based on your own outlook.

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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