Dycom (DY)

Telecommunications company Dycom (NYSE:DY) announced better-than-expected revenue in Q3 CY2025, with sales up 14.1% year on year to $1.45 billion. The company expects next quarter’s revenue to be around $1.3 billion, close to analysts’ estimates. Its non-GAAP profit of $3.63 per share was 13% above analysts’ consensus estimates.

Company Overview

Working alongside some of the most popular mobile carriers in the world, Dycom (NYSE:DY) builds and maintains telecommunications infrastructure.

Companies providing engineering and design services boast ever-evolving technical expertise. Compared to their counterparts who manufacture and sell physical products, these companies can also pivot faster to more trending areas due to their smaller physical asset bases. Green energy and water conservation, for example, are current themes driving incremental demand in this space. On the other hand, those providing engineering and design services are at the whim of construction and infrastructure project volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.

Competitors offering similar services include Quanta (NYSE:PWR), AECOM (NYSE:ACM), and MYR (NASDAQ:MYRG).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Dycom grew its sales at a solid 10.2% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Dycom’s annualized revenue growth of 11.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Dycom reported year-on-year revenue growth of 14.1%, and its $1.45 billion of revenue exceeded Wall Street’s estimates by 3%. Company management is currently guiding for a 19.9% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 10.9% over the next 12 months, similar to its two-year rate. This projection is noteworthy and indicates the market is forecasting success for its products and services.

Dycom has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 18.7% gross margin over the last five years. That means Dycom paid its suppliers a lot of money ($81.26 for every $100 in revenue) to run its business.

In Q3, Dycom produced a 22.1% gross profit margin, marking a 1.3 percentage point increase from 20.8% in the same quarter last year. Dycom’s full-year margin has also been trending up over the past 12 months, increasing by 1.1 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Dycom was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.7% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Dycom’s operating margin rose by 7.1 percentage points over the last five years, as its sales growth gave it immense operating leverage.

This quarter, Dycom generated an operating margin profit margin of 14.7%, up 6.7 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Dycom’s EPS grew at an astounding 33.3% compounded annual growth rate over the last five years, higher than its 10.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Dycom’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Dycom’s operating margin expanded by 7.1 percentage points over the last five years. On top of that, its share count shrank by 9.5%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Dycom, its two-year annual EPS growth of 15.9% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, Dycom reported adjusted EPS of $3.63, up from $2.68 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Dycom’s full-year EPS of $9.96 to grow 12.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Dycom has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.5%, lousy for an industrials business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Dycom’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 11.7%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Dycom’s ROIC has increased. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Dycom reported $110.1 million of cash and $1.06 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $691.7 million of EBITDA over the last 12 months, we view Dycom’s 1.4× net-debt-to-EBITDA ratio as safe. We also see its $31.87 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Dycom beat analysts’ revenue and EBITDA expectations this quarter. We were also glad its EBITDA and EPS guidance for next quarter outperformed Wall Street’s estimates. Zooming out, we think this quarter featured many important positives. The stock traded up 7.5% to $318.50 immediately following the results.

Updated: December 4, 2025 at 9:07 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Dycom.

There is a lot to like about Dycom. To begin with, its revenue growth was solid over the last five years, and its growth over the next 12 months is expected to accelerate. And while its low gross margins indicate some combination of competitive pressures and high production costs, its expanding operating margin shows the business has become more efficient. On top of that, Dycom’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Dycom’s P/E ratio based on the next 12 months is 29x. Scanning the industrials space today, Dycom’s fundamentals really stand out, and we like it at this price.

Wall Street analysts have a consensus one-year price target of $385.56 on the company (compared to the current share price of $352.00), implying they see 9.5% upside in buying Dycom in the short term.