Limbach Holdings, Inc. LMB, a leading mechanical systems provider, has been making waves in the market lately, with its stock trading near a 52-week high. On Friday, the LMB stock crafts a new 52-week high of $103.20 and pulled back to end the trading session at $102.64.
The stock has been on a remarkable run in 2024. The stock has surged 125.7% year to date (YTD), outperforming the Zacks Building Products - Maintenance Service industry’s 19.6% growth, catching the attention of many investors. The broader Zacks Business Services sector rose 22.7% and the S&P 500 grew 25.3% in the same time frame. The company’s stellar performance has been driven by strategic initiatives, impressive financial results, and favorable industry tailwinds.
Notably, LMB stock has even outperformed some other similar players in the YTD period, including Great Lakes Dredge & Dock Corporation GLDD and Ameresco, Inc. AMRC. During the said time frame, shares of GLDD have gained 60.6%, while AMRC shares have lost 16.7%. Meanwhile, Tutor Perini Corporation TPC have gained 213.4%.
Limbach’s YTD Share Performance
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LMB Stock Trades Above 50 and 200-Day Moving Averages
Technical indicators suggest continued strong performance for Limbach. Notably, the 50-day SMA continues to read higher than the 200-day SMA, signaling the bullish trend. This technical strength underscores positive market sentiment and confidence in Limbach’s financial health and prospects.
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But the question remains: Should you buy, sell, or hold Limbach stock after its impressive gains? Let’s dive into the factors driving the stock and assess its potential.
What’s Behind Limbach’s Growth?
High-Margin Business Model: Limbach’s transition from General Contractor Relationships to Owner-Direct Relationships (ODR) has been a game-changer. ODR projects offer higher margins, contributing 82.1% of total gross profits in the third quarter of 2024. This shift is part of a broader strategy to position the company as a solutions provider rather than a traditional contractor.
Limbach’s third-quarter 2024 earnings report solidified its transformation story. The company delivered an earnings per share (EPS) of 62 cents, beating estimates by 8.8%, and reported revenues of $133.9 million, a 4.8% year-over-year increase. This was bolstered by its pivot toward ODR, which accounted for nearly 70% of total revenues in the quarter, up from 51.5% a year ago. The focus on the high-margin ODR business has paid off. Gross profit grew 15.6% year over year, with gross margins expanding to 27% from 24.5% a year ago.
The company raised its 2024 revenue guidance to $520–$540 million (from $515 million–$535 million) and adjusted EBITDA to $60–$63 million (from $55 million–$58 million), reflecting management’s confidence in its growth trajectory.
Strategic Acquisitions: The company has completed four acquisitions since late 2021, including the recent purchase of Kent Island Mechanical. These acquisitions are integrated into Limbach’s platform to create synergies, strengthen customer relationships, and expand its footprint in key markets like healthcare and industrial manufacturing.
Evolved Offerings: Limbach’s investment in innovative solutions, such as rental equipment for indoor climate control, enhances its service portfolio. Additionally, bundled service contracts, which include maintenance, engineering, and capital planning, offer durable revenue streams and foster deeper customer engagement.
Sector Tailwinds: Demand from mission-critical verticals—data centers, healthcare, and industrial manufacturing—remains robust. This ensures a steady pipeline of opportunities for Limbach’s high-value offerings.
Valuation: Is the Stock Still Undervalued?
Despite its impressive gains, Limbach remains attractively valued. The company currently trades at a forward 12-month price-to-earnings (P/E) ratio significantly below the industry average. This suggests that investors may still be underestimating the company’s potential for further growth.
Limbach's undervaluation can also be linked to broader market trends. The construction and engineering sector has experienced some volatility amid concerns over interest rates and economic uncertainty, which has led to cautious investor sentiment. Also, such a disparity could be attributed to lingering investor skepticism about smaller-cap firms, but Limbach’s financial results and strategic direction may soon change the narrative.
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LMB Stock’s Estimate Movement Trending Upward
Analysts are showing confidence in the stock, as indicated by recent upward revisions in EPS estimates. The estimated figures for 2024 and 2025 indicate 44.3% and 19.1% year-over-year growth.
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Price Target Suggests Potential Upside for LMB
The company's strong position is further emphasized by its attractive Average Brokerage Recommendation (ABR). Out of three recommendations that contribute to the current ABR, all analysts have rated the stock as a Strong Buy. This results in an impressive ABR of 1.00 for the company. Wall Street’s average price target for the stock stands at $105.50 per share, indicating a potential 6.6% upside from the most recent closing price.
How to Play Limbach Stock?
Limbach differentiates itself by focusing on mission-critical systems and cultivating long-term relationships with building owners. The company’s unique positioning as a provider of recurring, economically resilient revenue streams offers a compelling value proposition to its customers. Its diversified client base, spanning multiple sectors, further enhances stability and growth potential.
The company’s discounted valuation relative to the industry provides a margin of safety, while its strategic initiatives and sector momentum underscore its long-term potential. For investors with an existing position may want to hold as the company continues to scale its ODR business and unlock value through acquisitions.
For investors looking for a high-growth stock with room for multiple expansion, this Zacks Rank #1 (Strong Buy) company deserves a closer look. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Free: See Our Top Stock And 4 Runners UpAmeresco, Inc. (AMRC) : Free Stock Analysis Report
Great Lakes Dredge & Dock Corporation (GLDD) : Free Stock Analysis Report
Tutor Perini Corporation (TPC) : Free Stock Analysis Report
Limbach Holdings, Inc. (LMB) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
