Sterling Infrastructure vs Other Engineering & Construction

When investors compare Sterling Infrastructure (ticker: STRL) to other engineering and construction companies, the key metrics to examine are revenue mix, margin stability, backlog quality, and the balance between lump-sum and cost-plus contracts. This article breaks down the specific financial and operational ratios that matter most, along with the industry context that makes Sterling different from general contractors like Jacobs, AECOM, or smaller regional players.

Formula

The calculator above computes average pace (minutes per kilometer) and average speed (kilometers per hour) from a given finish time and distance. The formulas are:

• Pace (min/km) = Total Time (min) ÷ Distance (km)
• Speed (km/h) = Distance (km) ÷ (Total Time (min) ÷ 60)

Variables: t = total time in minutes, d = distance in kilometers. If you use miles, convert distance to kilometers (1 mile = 1.60934 km) before entering.

Worked Example

Using the default values: t = 50 minutes, d = 10 km.

1. Pace = 50 ÷ 10 = 5.0 min/km
2. Speed = 10 ÷ (50/60) = 10 ÷ 0.8333 = 12.00 km/h

The calculator returns a pace of 5.00 min/km and a speed of 12.00 km/h. This matches the headline output.

Why This Comparison Matters

Sterling Infrastructure operates in three segments: E-Infrastructure (data centers, highways, heavy civil), Transportation Solutions, and Building Solutions. Unlike many diversified engineering firms that derive revenue from design fees, Sterling is primarily a construction contractor, meaning its revenue is tied to physical project execution. Investors should compare Sterling to companies with similar project types—like DPR Construction (private), Holder Construction (private), or public peers such as Granite Construction (GVA) and Tutor Perini (TPC)—rather than to pure design firms like AECOM or Jacobs, which have different risk profiles and margin structures.

Key Financial Ratios to Compare

• Gross Margin: Sterling’s gross margin typically runs 10-15%, higher than heavy civil peers but lower than specialty contractors. Compare this to Granite (often 8-12%) and Tutor Perini (often 5-9%).
• Operating Margin: Look at EBIT margin after SG&A. Sterling has historically posted operating margins around 6-8%, which is strong for construction. AECOM’s operating margin is often 4-6% because of lower-margin design work.
• Backlog-to-Revenue Ratio: Backlog divided by annual revenue indicates revenue visibility. Sterling’s backlog often covers 1-2 years, but data center projects can extend further. Compare with Granite’s backlog, which is typically 1-1.5 years.
• Debt-to-EBITDA: Construction is capital-intensive; a ratio above 3x is concerning. Sterling has maintained leverage below 2x, which is healthier than many peers.
• Return on Equity (ROE): Sterling’s ROE often exceeds 15% due to high margins and asset turnover. Compare with Tutor Perini, which has seen ROE below 10% in recent years.

Qualitative Factors Beyond the Numbers

Numbers alone don’t tell the full story. Consider these qualitative aspects:

• Contract Type Mix: Sterling has a higher proportion of cost-plus and design-build contracts in its E-Infrastructure segment, which reduces risk of cost overruns. Check the 10-K to see the percentage of fixed-price vs. cost-reimbursable contracts.
• Customer Concentration: Sterling’s data center work is concentrated among a few large tech companies. Compare how diversified the customer base is relative to peers who serve many government agencies.
• Project Size and Complexity: Large data center projects (>$100M) carry different execution risks than small highway projects. Review the average project size and the largest projects in backlog.
• Geographic Footprint: Sterling operates mainly in the southern and western U.S., while Granite is more California-centric and AECOM is global. Geographic diversification affects exposure to regional economic cycles.

Common Pitfalls in Comparison

Investors often make these mistakes when comparing construction firms:

• Comparing Revenue Growth Without Context: A company can grow revenue by taking on low-margin work. Always look at gross margin trend alongside growth.
• Ignoring Working Capital: Construction companies carry large receivables and payables. Compare cash conversion cycle (days sales outstanding + days inventory outstanding – days payable outstanding). Sterling typically has a negative cash conversion cycle because it gets paid before paying subcontractors.
• Overlooking Seasonality: Q1 is often weak due to weather and slower starts. Compare year-over-year rather than sequential quarters.
• Using EBITDA Alone: EBITDA ignores interest and taxes, which can be significant. Use net income and free cash flow for a fuller picture.

How to Use This Comparison in Your Analysis

Start by pulling the latest 10-K and 10-Q filings from the SEC EDGAR database. Build a simple table with the ratios above for Sterling and 2-3 peers. Then look at the management’s discussion of backlog and contract mix. Finally, check the order of magnitude of share buybacks and dividends—Sterling pays a small dividend but focuses on reinvestment, which is typical for growth-oriented contractors. If you are comparing to a design firm like AECOM, also adjust for the fact that design firms have lower revenue but higher margins and lower capital intensity—so use ROIC (return on invested capital) rather than ROE for a fair comparison.

Frequently Asked Questions

What is Sterling Infrastructure’s main business?

Sterling operates in three segments: E-Infrastructure (data centers, highways, and heavy civil), Transportation Solutions (road and bridge construction), and Building Solutions (commercial and residential concrete work). The E-Infrastructure segment is the largest and fastest-growing, driven by data center demand.

How does Sterling compare to Granite Construction?

Sterling has higher gross margins and a stronger focus on private-sector data center work, while Granite relies more on public highway contracts. Sterling’s operating margin is typically 2-3 percentage points higher, but Granite has a more diversified geographic footprint.

Is Sterling Infrastructure a good dividend stock?

Sterling pays a small dividend (yield under 1%) and uses most cash for reinvestment and share buybacks. It is more of a growth stock than an income stock. For income, look at larger, more mature contractors like Jacobs or AECOM, which pay higher yields.

What risks should I watch for with Sterling?

Key risks include customer concentration (a few large tech companies), potential cost overruns on fixed-price contracts, and sensitivity to interest rates affecting data center construction. Also watch for labor shortages and material cost inflation, which can squeeze margins.

Why is Sterling’s stock so volatile?

Construction stocks are cyclical and sensitive to economic conditions, commodity prices, and project delays. Sterling also has a smaller market cap than peers, so news about a single large project can move the stock significantly.

Where can I find the latest financial data?

Use the SEC EDGAR database for filings, and financial websites like Yahoo Finance or MarketWatch for real-time quotes and ratios. Always cross-check numbers from the company’s own filings rather than relying on third-party summaries.

Related

• Speed Slime Keyboard Escape: Massive Admin Abuse?
• Grow a Garden Carrot Coins?
• AFM Tip Measurements: Cantilever Motion to Surface Data

in t | Finish time | min | 50 | 0
in d | Distance | km | 10 | 0
out pace | Average pace | min/km | t / d | 2
out speed | Average speed | km/h | d / (t / 60) | 2