|Written by GSCR Staff|
|Wednesday, 19 October 2016 06:58|
Unless you are drinking the Kool-Aid you are probably a lot like us and cannot wait until Wednesday November 9th, the day after the Presidential Election. Let’s face it. Our choices are ‘deplorable’. In all the mud-slinging what is really getting lost is that Trump, who is really not a conservative, and Hillary agree on more issues than what is typical for the top job in the land. One of them is the need to rebuild our infrastructure. We think there is a chance to capitalize in the small cap space.
Below is the one-year chart for Tutor Perini Corporation (NYSE – TPC - $19.05) which illustrates a great run from May to August this year with roughly a 75% rise in price over that time. The stock has taken a hit over the last couple of months but we believe it is time to get back in.
Tutor Perini Corporation provides diversified general contracting, construction management, and design-build services to private customers and public agencies worldwide. It operates through three segments: Civil, Building, and Specialty Contractors. The Civil segment engages in the public works construction and repair, replacement, and reconstruction of infrastructure, including highways, bridges, mass transit systems, and water management and wastewater treatment facilities. This segment also provides drilling, foundation, and excavation support for shoring, bridges, piers, roads, and highway projects. The Building segment offers services in various specialized building markets, including hospitality and gaming, transportation, healthcare, corporate and municipal offices, sports and entertainment, educational, correctional facilities, biotech, pharmaceutical, industrial, and high-tech. The Specialty Contractors segment provides electrical, mechanical, plumbing, fire protection systems, and pneumatically placed concrete services, as well as heating, ventilation, and air conditioning for the industrial, commercial, hospitality and gaming, and mass transit end markets.
Obviously our main thesis here for a buy is the overall macroeconomic factor that predicts that infrastructure projects will be on the top of the priority list no matter who is elected President. Tutor Perini’s diverse product line and vast market should solidly position the Company to benefit from this government spending.
The Company has performed well when it comes to EPS, having hit or beat the number three straight quarters. The trailing P/E of 14 is double the forward P/E of 7 on Wall Street revenue growth estimates of 6% this year and next for a predicted top line number of $5.5 billion in 2017. Finally, an Enterprise Value to EBITDA at a low 8.7 is a good sign if there happens to be some M&A activity in the sector next year.
TPC is a solid long-term play if you believe, as we do, that infrastructure projects will be a nationwide priority in 2017 and beyond. We like a target of $25 over the next year.
Have a great day!
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