Sterling Construction Company (NASDAQ: STRL) is
engaged in the construction and reconstruction of U.S. infrastructure. Projects involve highways, roads, bridges, wastewater facilities and storm drainage systems. The firm also provides general contracting services, including excavations, paving, pipe installation and concrete placement. Sterling clients are municipal and state districts, departments and authorities.
The firm pleased investors last month, when it announced Q4 EPS of 39 cents and revenues of $88.3 million. Analysts had been expecting 32 cents and $88.6 million. Management also guided FY08 EPS to $1.43-$1.57 ($1.48 consensus) and FY08 revenues to $428-$473 million ($447.20M consensus). Sterling's President noted that the company closed the year with working capital of more than $82 million, its strongest financial position ever.
The share
price popped on the news and has since been consolidating the gain in a bullish "pennant" pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the stock with one "strong buy", one "buy" and one "hold". Analysts see an 18% average annual growth rate, through the next five years. The STRL P/E ratio (15.29), Price to Sales ratio (0.80), Price to Book ratio (1.75), Price to Cash Flow ratio (10.19), Sales Growth rate (37.75%) and EPS Growth rate (62.50%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 62% of the outstanding shares. Over the past 52 weeks, the stock has traded between $15.87 and $26.98. A stop-loss of $16.50 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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