Last Update 17 Feb 26
MYRG: Higher P/E Assumptions Will Balance Execution Risks And Solar Concerns
The analyst price target for MYR Group has moved to $254.33, with analysts pointing to updated assumptions around discount rates, profitability, and a higher future P/E multiple as key drivers behind the revised view.
Analyst Commentary
Recent research updates sketch out a largely constructive view on MYR Group, framed around revised assumptions for discount rates, profitability, and the future P/E multiple that feeds into the new US$254.33 price target.
Bullish Takeaways
- Bullish analysts highlight that updated profitability assumptions support a higher earnings base, which they see as aligning with the higher targeted P/E multiple.
- The higher price target is viewed as consistent with MYR Group executing on its current project pipeline, with analysts pointing to potential operating efficiencies as a key support for valuation.
- Some bullish views frame the revised target as reflecting confidence that the company can support a premium P/E relative to prior assumptions, given its position in its core end markets.
- Initiation with a positive stance is often tied to the belief that the current share price does not fully reflect the earnings power implied in the updated models.
Bearish Takeaways
- Bearish analysts caution that the higher P/E multiple embedded in the new target could be sensitive to any disappointment in margins or project execution.
- There is some concern that changes to discount rates in the modeling are assumptions rather than visible outcomes, which could introduce valuation risk if conditions do not match those inputs.
- A more cautious view points to the possibility that expectations implied by the revised target may leave less room for error if growth or profitability trends come in below current forecasts.
- Some reservations center on the potential for project timing or cost pressures to affect earnings, which would challenge the higher valuation framework used in recent target updates.
Valuation Changes
- Fair Value: The modeled fair value is held at $254.33, with no change between the prior and updated assumptions.
- Discount Rate: The discount rate has risen slightly, moving from 8.53% to 8.57%, which marginally reduces the present value of projected cash flows.
- Revenue Growth: Forecast revenue growth is effectively unchanged, staying close to 8.98% in both the prior and updated models.
- Net Profit Margin: The assumed net profit margin remains stable at about 3.95%, with only a very small adjustment in the updated inputs.
- Future P/E: The future P/E multiple has risen meaningfully from 23.54x to 27.19x. This indicates that a larger share of the $254.33 fair value is now attributed to the valuation multiple rather than changes in cash flow forecasts.
Key Takeaways
- Expanding multi-year contracts, focus on electrification, and higher-margin projects are driving increased demand, revenue visibility, and steady margin improvement.
- Strong balance sheet and strategic investments, including skilled workforce development and acquisitions, support growth, pricing power, and enhanced shareholder returns.
- Rising labor costs, shrinking renewables, volatile backlog, and fierce competition threaten margin expansion, stable earnings, and long-term profitability amid ambitious growth investments.
Catalysts
About MYR Group- Through its subsidiaries, provides electrical construction services in the United States and Canada.
- Significant multi-year utility contracts (notably the new 5-year master service agreement with Xcel Energy and others in the Northeast/Midwest) are set to expand recurring revenues and improve backlog visibility, supporting higher future revenue and greater earnings predictability.
- Sustained momentum in electrification-spanning grid upgrades, data center buildouts, and transportation-coupled with robust private/public sector investment, is expected to drive strong demand for MYR Group's infrastructure services, elevating the overall addressable market and supporting top-line growth.
- Increased project mix in higher-margin segments (such as battery storage and data centers), combined with operational improvements and careful contract selectivity, are positioned to contribute to steady margin expansion and higher net earnings over time.
- Strategic capital allocation and a healthy balance sheet (low leverage, substantial borrowing capacity, and new $75 million share repurchase authorization) enable continued investment in organic growth, accretive acquisitions, and share buybacks, supporting future EPS and shareholder returns.
- Active response to ongoing labor shortages by internally developing skilled workforce and augmenting capabilities through targeted acquisitions positions MYR Group to capitalize on sector-wide supply constraints, supporting pricing power and sustaining or improving net margins.
MYR Group Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming MYR Group's revenue will grow by 8.0% annually over the next 3 years.
- Analysts assume that profit margins will increase from 2.2% today to 3.6% in 3 years time.
- Analysts expect earnings to reach $157.2 million (and earnings per share of $9.45) by about September 2028, up from $76.4 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.9x on those 2028 earnings, down from 35.5x today. This future PE is lower than the current PE for the US Construction industry at 34.7x.
- Analysts expect the number of shares outstanding to decline by 3.72% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.18%, as per the Simply Wall St company report.
MYR Group Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Declining contribution from solar and renewables projects (from 10% of T&D revenues last year to just 4% and continuing to decrease) signals increased dependence on core T&D and C&I markets, exposing MYR Group to the risk that if utility or industrial demand falters, future revenue growth and backlog could be negatively impacted.
- Labor cost inflation and project inefficiencies are already partially offsetting margin improvements; ongoing skilled labor shortages and wage increases across the industry could compress gross margins and constrain net earnings as the company bids and executes new, larger contracts.
- Sequential decline in C&I backlog despite major wins, combined with management's acknowledgment of lumpy backlog and extended contract negotiations, raises the risk of volatile or unpredictable revenue streams and cash flows, which could pressure earnings consistency and reduce investor confidence.
- Higher SG&A and capital expenditures required to capture growth opportunities (such as ramp-up for larger projects and expanded labor investment) could erode operating leverage if topline growth slows, impacting profitability and free cash flow over the long term.
- Intensifying competition in both T&D and C&I segments, with rising acquisition multiples cited by management and broader industry consolidation, may force MYR Group to either pay a premium for strategic acquisitions or accept lower margins on competitive bids, potentially dampening margin expansion and long-term earnings growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $209.6 for MYR Group based on their expectations of its future earnings growth, profit margins and other risk factors.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.3 billion, earnings will come to $157.2 million, and it would be trading on a PE ratio of 21.9x, assuming you use a discount rate of 8.2%.
- Given the current share price of $174.58, the analyst price target of $209.6 is 16.7% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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