In This Article:
- By GF Value
The stock of Primoris Services (NAS:PRIM, 30-year Financials) is estimated to be modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $32.69 per share and the market cap of $1.8 billion, Primoris Services stock gives every indication of being modestly overvalued. GF Value for Primoris Services is shown in the chart below.
Because Primoris Services is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 16% over the past five years.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. Primoris Services has a cash-to-debt ratio of 0.62, which ranks in the middle range of the companies in Construction industry. Based on this, GuruFocus ranks Primoris Services's financial strength as 6 out of 10, suggesting fair balance sheet. This is the debt and cash of Primoris Services over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Primoris Services has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $3.5 billion and earnings of $2.16 a share. Its operating margin is 4.79%, which ranks in the middle range of the companies in Construction industry. Overall, GuruFocus ranks the profitability of Primoris Services at 8 out of 10, which indicates strong profitability. This is the revenue and net income of Primoris Services over the past years: