MasTec has been on fire lately. In the past six months alone, the company’s stock price has rocketed 46.2%, reaching $353.54 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now still a good time to buy MTZ? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does MTZ Stock Spark Debate?
Involved in the 1996 Olympic Games MasTec (NYSE: MTZ) is an infrastructure construction company that specializes in the telecommunications, energy, and utility industries.
Two Things to Like:
1. Surging Backlog Locks In Future Sales
We can better understand Engineering and Design Services companies by analyzing their backlog. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into MasTec’s future revenue streams.
MasTec’s backlog punched in at $20.33 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 24.1%. This performance was fantastic and shows the company has a robust sales pipeline because it is accumulating more orders than it can fulfill. Its growth also suggests that customers are committing to MasTec for the long term, enhancing the business’s predictability. 
2. EPS Surges Higher Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
MasTec’s EPS grew at an astounding 77.1% compounded annual growth rate over the last two years, higher than its 12.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to Be Careful:
Low Gross Margin Reveals Weak Structural Profitability
Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.
MasTec has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 12.7% gross margin over the last five years. Said differently, MasTec had to pay a chunky $87.34 to its suppliers for every $100 in revenue.
Final Judgment
MasTec’s merits more than compensate for its flaws, and with the recent rally, the stock trades at 35.3× forward P/E (or $353.54 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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