Fundamental analysis
Limbach Holdings is a company that designs, installs, services, and manages heating, ventilation, air conditioning, electrical wiring and ductwork in homes, and home management technology automation.
Home modifications and improvements are currently a growing segment. On the other hand, general business activity (46.7%) and new orders (45.5%) in the October PMI report on services point to a possible cooling.
The main sectors that Limbach focuses on are:
- Hospitals
- Cultural and entertainment centres and stadiums
- Schools and universities
- Factories
- Data centres
- Others
The company is profitable as of 2020 with turnover continuously growing. The average turnover is approximately USD 490 million per year.
EBITDA has been growing since 2018.
Margin is over 21% on average.
The share price has risen more than 200% since the beginning of the year.
The company has low debt.
Results
The company increased sales by 7.5% to $124.9 million in the second quarter of 2023.
EBITDA rose 81% to $11.9 million.
Cash increased from $15.6 million to $16.9 million.
The company is seeing strong demand for their services, which has allowed margins to increase. Additionally, Limbach purchased ACME Industrial Products (focused on hydroelectric power plant electrical maintenance). Limbach says its CEO is also actively seeking other potential acquisitions this year.
Technical analysis
The stock is very volatile which can be attributed to the lower volume of around 150,000 shares per day. Given the strong fundamental upside, the stock has broken through all its old resistances. Currently, the price is sitting on a flip below $30.
The moving averages have been in an uptrend for over 1 year.
The RSI is holding in the neutral zone due to the price correction.
Conclusion
Construction overseas is going strong (although recent PMI reports point to a possible cooling) and Limbach has a well straddled services portfolio. The company is healthy, increasing margin for several years in a row. Profits are up and debt is low. The share price has been rising for more than 1 year straight and is still at a low absolute price. However, in recent weeks there has been a correction in the price and a return to around $30. It is questionable if the growth will continue in light of the new economic news.
A possible negative is that the stock is very volatile.