Concrete Pumping’s 21% return over the past six months has outpaced the S&P 500 by 17.6%, and its stock price has climbed to $7.73 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Concrete Pumping, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Concrete Pumping Not Exciting?
We’re glad investors have benefited from the price increase, but we don't have much confidence in Concrete Pumping. Here are three reasons there are better opportunities than BBCP and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Concrete Pumping’s 5.7% annualized revenue growth over the last five years was tepid. This was below our standard for the industrials sector.
2. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for Concrete Pumping, its EPS declined by more than its revenue over the last two years, dropping 47.7%. This tells us the company struggled to adjust to shrinking demand.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Concrete Pumping historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.5%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Concrete Pumping isn’t a terrible business, but it doesn’t pass our bar. With its shares beating the market recently, the stock trades at 51.7× forward P/E (or $7.73 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of our top digital advertising picks.
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