Sterling Infrastructure: Another Breakout Is Likely, But Chasing Here May End Badly

Summary

• STRL benefits from infrastructure growth in data centers and aviation, explaining why the stock has well outperformed the wider market over the past few years.
• The same robust demand has been exemplified in its increased contract awards, growing backlog, and expanding profit margins, significantly aided by the multi-year domestic opportunities.
• While these have led to raised consensus forward estimates, we cannot reconcile the growth projections to STRL's premium valuations, with it notably expensive compared to its peer group.
• While the stock may chart another vertical rally as observed the past few earnings calls, it has also pulled forward most of its upside potential, offering a minimal margin of safety.
• As a mid-cap stock, STRL is also more likely to be volatile, especially due to its small float and growing short interest. We prefer to initiate Hold for now.

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STRL Continues To Benefit From The Ongoing Infrastructure Boom

STRL 5Y Stock Price

Sterling Infrastructure, Inc. (NASDAQ:STRL) is a construction company that is currently enjoying robust tailwinds from the booming data center and

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The analysis is provided exclusively for informational purposes and should not be considered professional investment advice. Before investing, please conduct personal in-depth research and utmost due diligence, as there are many risks associated with the trade, including capital loss.