Dycom currently trades at $261 and has been a dream stock for shareholders. It’s returned 533% since July 2020, blowing past the S&P 500’s 97.6% gain. The company has also beaten the index over the past six months as its stock price is up 35.3% thanks to its solid quarterly results.
Is it too late to buy DY? Find out in our full research report, it’s free.
Why Does DY Stock Spark Debate?
Working alongside some of the most popular mobile carriers in the world, Dycom (NYSE: DY) builds and maintains telecommunications infrastructure.
Two Positive Attributes:
1. Long-Term Revenue Growth Shows Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Dycom’s 7.7% annualized revenue growth over the last five years was decent. Its growth was slightly above the average industrials company and shows its offerings resonate with customers. 
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Dycom’s EPS grew at an astounding 27.2% compounded annual growth rate over the last five years, higher than its 7.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Dycom’s margin dropped by 7.1 percentage points over the last five years. If the trend continues, it could signal it’s in the middle of a big investment cycle. Dycom’s free cash flow margin for the trailing 12 months was 1.7%.
Final Judgment
Dycom’s merits more than compensate for its flaws, and with its shares topping the market in recent months, the stock trades at 27.6× forward P/E (or $261 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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