Limbach (LMB)

Building systems company Limbach (NASDAQ:LMB) met Wall Streets revenue expectations in Q3 CY2025, with sales up 37.8% year on year to $184.6 million. The company’s full-year revenue guidance of $665 million at the midpoint came in 0.7% above analysts’ estimates. Its non-GAAP profit of $1.05 per share was in line with analysts’ consensus estimates.

Company Overview

Established in 1901, Limbach (NASDAQ: LMB) provides integrated building systems solutions, including mechanical, electrical, and plumbing services.

Construction and maintenance services companies not only boast technical know-how in specialized areas but also may hold special licenses and permits. Those who work in more regulated areas can enjoy more predictable revenue streams - for example, fire escapes need to be inspected every five years. More recently, services to address energy efficiency and labor availability are also creating incremental demand. But like the broader industrials sector, construction and maintenance services companies are at the whim of economic cycles as external factors like interest rates can greatly impact the new construction that drives incremental demand for these companies’ offerings.

Competitors in the building services industry include Comfort Systems USA (NYSE:FIX), EMCOR Group (NYSE:EME), and Dycom Industries (NYSE:DY)

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Limbach struggled to consistently increase demand as its $603.6 million of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result, but there are still things to like about Limbach.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Limbach’s annualized revenue growth of 8% over the last two years is above its five-year trend, suggesting some bright spots.

This quarter, Limbach’s year-on-year revenue growth of 37.8% was wonderful, and its $184.6 million of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 22.7% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will catalyze better top-line performance.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Limbach has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 22.3% gross margin over the last five years. That means Limbach paid its suppliers a lot of money ($77.68 for every $100 in revenue) to run its business.

Limbach produced a 24.2% gross profit margin in Q3, down 2.8 percentage points year on year. On a wider time horizon, however, Limbach’s full-year margin has been trending up over the past 12 months, increasing by 1.4 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).

Limbach was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.3% 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, Limbach’s operating margin rose by 5.9 percentage points over the last five years.

This quarter, Limbach generated an operating margin profit margin of 7.2%, down 1.4 percentage points year on year. Since Limbach’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Limbach’s EPS grew at an astounding 35.8% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.

We can take a deeper look into Limbach’s earnings to better understand the drivers of its performance. As we mentioned earlier, Limbach’s operating margin declined this quarter but expanded by 5.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

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 Limbach, its two-year annual EPS growth of 42.5% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q3, Limbach reported adjusted EPS of $1.05, up from $0.75 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Limbach’s full-year EPS of $4.25 to grow 4.5%.

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.

Limbach has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.3%, subpar for an industrials business.

Taking a step back, an encouraging sign is that Limbach’s margin expanded by 8 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Limbach’s free cash flow clocked in at $12.85 million in Q3, equivalent to a 7% margin. This result was good as its margin was 3.5 percentage points higher than in the same quarter last year, building on its favorable historical trend.

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).

Limbach’s five-year average ROIC was 20.7%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

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. Fortunately, Limbach’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Limbach reported $9.88 million of cash and $82.75 million 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 $75.4 million of EBITDA over the last 12 months, we view Limbach’s 1.0× net-debt-to-EBITDA ratio as safe. We also see its $760,000 of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Limbach provide full-year EBITDA guidance that slightly beat analysts’ expectations. We were also glad its full-year revenue guidance slightly exceeded Wall Street’s estimates. On the other hand, its EBITDA missed. Zooming out, we think this was a mixed quarter. The market seemed to be hoping for more, and the stock traded down 7.1% to $84 immediately after reporting.

Updated: December 3, 2025 at 10:39 PM EST

Before investing in or passing on Limbach, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

There’s plenty to admire about Limbach. Although its revenue growth was weak over the last five years, its growth over the next 12 months is expected to be higher. And while Limbach’s projected EPS for the next year is lacking, its rising cash profitability gives it more optionality. On top of that, its expanding operating margin shows the business has become more efficient.

Limbach’s P/E ratio based on the next 12 months is 16.7x. Looking at the industrials space right now, Limbach trades at a compelling valuation. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $126.25 on the company (compared to the current share price of $72.21), implying they see 74.8% upside in buying Limbach in the short term.