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2 Reasons to Like TPC (and 1 Not So Much)

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Tutor Perini trades at $77.92 per share and has stayed right on track with the overall market, gaining 15.3% over the last six months. At the same time, the S&P 500 has returned 10.9%.

Is now a good time to buy TPC? Find out in our full research report, it’s free.

Why Does TPC Stock Spark Debate?

Known for constructing the Philadelphia Eagles’ Stadium, Tutor Perini (NYSE: TPC) is a civil and building construction company offering diversified general contracting and design-build services.

Two Positive Attributes:

1. Skyrocketing Revenue Shows Strong Momentum

Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Tutor Perini’s annualized revenue growth of 17% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Tutor Perini Year-On-Year Revenue Growth

2. Increasing Free Cash Flow Margin Juices Financials

Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Tutor Perini’s margin expanded by 12.9 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat. Tutor Perini’s free cash flow margin for the trailing 12 months was 12.4%.

Tutor Perini Trailing 12-Month Free Cash Flow Margin

One Reason to Be Careful:

Low Gross Margin Reveals Weak Structural Profitability

For industrial businesses, cost of sales is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics in the short term and a company’s purchasing power and scale over the long term.

Tutor Perini has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 6.8% gross margin over the last five years. Said differently, Tutor Perini had to pay a chunky $93.18 to its suppliers for every $100 in revenue.

Tutor Perini Trailing 12-Month Gross Margin

Final Judgment

Tutor Perini has huge potential even though it has some open questions, but at $77.92 per share (or 14.1× forward P/E), is now the time to initiate a position? See for yourself in our full research report, it’s free.

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