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Since October 2024, MasTec has been in a holding pattern, posting a small loss of 3.6% while floating around $118.18.
Is there a buying opportunity in MasTec, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
We're sitting this one out for now. Here are three reasons why there are better opportunities than MTZ and a stock we'd rather own.
Why Is MasTec Not Exciting?
Involved in the 1996 Olympic Games MasTec (NYSE:MTZ) is an infrastructure construction company that specializes in the telecommunications, energy, and utility industries.
1. Low Gross Margin Reveals Weak Structural Profitability
Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.
MasTec has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 13.3% gross margin over the last five years. That means MasTec paid its suppliers a lot of money ($86.69 for every $100 in revenue) to run its business.
2. EPS Trending Down
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.
Sadly for MasTec, its EPS declined by 6.3% annually over the last five years while its revenue grew by 11.4%. This tells us the company became less profitable on a per-share basis as it expanded.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, MasTec’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
MasTec isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 22.6× forward price-to-earnings (or $118.18 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward one of our top software and edge computing picks.
Stocks We Like More Than MasTec
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.