MYR Group: Strong Q2 But Valuation Stretched; Potential Sell on Strength

What happened

MYR Group delivered robust Q2 results with EPS surging 86% YoY to $3.17, revenue up 20% to $1.08B, and record C&I segment growth and margin expansion. The company's backlog hit a record $3.16B (+20% YoY), but a significant portion from large projects will not contribute to revenue until late 2027, delaying near-term benefits. The DeepValue master report rates MYR a POTENTIAL SELL with conviction 3.5, citing the stock's 37x trailing P/E and 31x EV/EBITDA, which price in durable high margins the company has not historically demonstrated. Despite secular tailwinds, MYR's thin margins, percentage-of-completion accounting, and potential for project losses create significant earnings volatility, leaving limited margin of safety at today's price. With crowded sentiment and analyst targets mostly below the current price, the risk-reward skews toward trimming or exiting above $230, while an attractive entry would require a pullback toward $170.

Implication

The strong Q2 and backlog growth confirm secular demand, but the market has already priced in much of this optimism. With a high P/E and EV/EBITDA, any margin disappointment or project overruns could lead to sharp de-rating. The late conversion of backlog into revenue (late 2027) means near-term earnings may not accelerate further from current levels, limiting upside catalysts. Given the crowded trade and analyst targets near or below the stock price, there is little support for further multiple expansion. Therefore, a disciplined approach would be to hold or trim existing positions, set a buy target around $170, and wait for more visible evidence of sustained margin improvement before committing new capital.

Thesis delta

The article's confirmation of strong Q2 results and record backlog does not change the core thesis that MYR is overvalued relative to its historical margin profile and risk characteristics. The delayed revenue recognition from large projects means near-term fundamentals may not justify the current multiple. Thus, the POTENTIAL SELL rating remains appropriate, with no shift in conviction.