Sterling Infrastructure (STRL): Assessing Valuation Following $400 Million Share Buyback Announcement

Sterling Infrastructure (STRL) just announced a fresh share buyback program, approving up to $400 million in repurchases over the next two years. Share buybacks can signal management’s confidence and may draw attention from value-focused investors.

See our latest analysis for Sterling Infrastructure.

Sterling Infrastructure’s buyback news comes as the company rides a wave of momentum. Its 2024 share price return stands at an impressive 98.5%, and the latest total shareholder return over 12 months reached 67.3%. Recent quarters have seen some volatility, but over the past five years, shareholders have enjoyed a remarkable 1,980% total return, highlighting sustained performance and strong growth perceptions around the business.

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With shares nearly doubling this year and a new buyback in play, the question now is whether Sterling Infrastructure’s stellar run leaves further upside or if investors are already paying for tomorrow’s growth today.

Most Popular Narrative: 26.6% Undervalued

Sterling Infrastructure’s narrative-driven fair value estimate stands at $453, a full 36% above its recent closing price. This gap highlights optimism surrounding the company’s future growth and margin trajectory.

Record-high and growing backlog, particularly in E-Infrastructure Solutions (up 44% year-over-year to $1.2 billion), coupled with a robust pipeline of future phase work approaching $2 billion, provides strong multi-year revenue visibility and stability, mitigating downside risk to revenues and supporting sustained earnings growth.

Read the complete narrative.

Want to know why the market’s so confident? The fair value here is powered by aggressive top-line forecasts and margin assumptions not typical for this industry. Want to see the bold projections and daring expectations built into these estimates? Take a closer look at the narrative’s numbers and see what could really move the stock.

Result: Fair Value of $453 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained revenue growth is vulnerable to shifts in mega-project activity and potential slowdowns in infrastructure stimulus funding. These factors could challenge Sterling’s momentum.

Find out about the key risks to this Sterling Infrastructure narrative.

Another View: Discounted Cash Flow Perspective

Taking a different angle, our DCF model estimates Sterling's fair value at $314. This is actually below its recent market price, suggesting that the current optimism may already be reflected. As a result, there could be less margin for error if growth falters. Which approach offers the best read on value?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Sterling Infrastructure for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 931 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Sterling Infrastructure Narrative

If this perspective doesn’t fully align with your own, take a few minutes to review the figures and shape your own narrative in just moments. Do it your way

A great starting point for your Sterling Infrastructure research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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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