Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Construction & Engineering industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Latest Construction & Engineering Stock News

Before choosing which top Construction & Engineering stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

The Heavy and Civil Engineering Construction subsector comprises establishments whose primary activity is the construction of entire engineering projects, such as highways and dams, and specialty trade contractors, whose primary activity is the production of a specific component for such projects. Specialty trade contractors in the Heavy and Civil Engineering Construction subsector generally are performing activities that are specific to heavy and civil engineering construction projects and are not normally performed on buildings. The work performed may include new work, additions, alterations, or maintenance and repairs. Specialty trade activities are classified in this subsector if the skills and equipment present are specific to heavy or civil engineering construction projects. For example, specialized equipment is needed to paint lines on highways. This equipment is not normally used in building applications so the activity is classified in this subsector. Construction projects involving water resources, including dredging and land drainage, and projects involving open space improvement of parks and trails are included in this subsector. Some establishments in this subsector focus on the subdivision of land into individual building lots usually perform various additional site-improvement activities, like road building and utility line installation. Establishments in this subsector are classified based on the types of structures that they construct. This classification reflects variations in the requirements of the underlying production processes.

Why Focus on Undervalued Construction & Engineering Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Construction & Engineering Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Construction & Engineering industry for Friday, February 24, 2023. Let’s take a closer look at their individual scores to see how they measure up against each other and the Construction & Engineering industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Granite Construction Inc.’s Value Grade

Value Grade:

Granite Construction Incorporated is a diversified infrastructure company. The Company delivers infrastructure solutions for public and private clients primarily in the United States. Within the public sector, it concentrates on infrastructure projects, including the construction of streets, roads, highways, mass transit facilities, airport infrastructure, bridges, dams, power-related facilities, utilities, tunnels and other infrastructure-related projects. Within the private sector, it performs site preparation, mining services, and infrastructure services for residential development, energy development, commercial and industrial sites, and other facilities, as well as provide construction management professional services. The Company's segments include Construction and Materials. The Construction segment focuses on construction and rehabilitation of roads. The Materials segment focuses on production of aggregates and asphalt production for internal use and for sale to third parties.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Granite Construction Inc. has a Value Score of 64, which is considered to be undervalued.

When you look at Granite Construction Inc.’s price-to-sales ratio at 0.57 compared to the industry median at 0.77, this company has a lower price relative to revenue compared to its peers. This could make Granite Construction Inc.’s stock more attractive for value investors.

Granite Construction Inc.’s price-earnings ratio is 26.81 compared to the industry median at 21.85. This means it has a higher share price relative to earnings compared to its peers. This could make Granite Construction Inc. less attractive for value investors.

Now, let’s assess Granite Construction Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 8.7, when compared to the industry median of 10.8, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Granite Construction Inc.’s shareholder yield is higher than its industry median ratio of (0.65%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Granite Construction Inc.’s price-to-book ratio is lower than its industry median ratio of 2.02. This could make Granite Construction Inc. more attractive to investors looking for a new addition to their portfolio.

Primoris Services Corp’s Value Grade

Value Grade:

Primoris Services Corporation is a provider of specialty contracting services. The Company offers specialty construction services, fabrication, maintenance, replacement, procurement, and engineering services through its three segments: Utilities Segment, Energy/Renewables and Pipeline Services Segment. The Utilities Segment offers services, including the installation and maintenance of new and existing natural gas distribution systems, electric utility distribution and transmission systems, and communications systems. The Energy/Renewables Segment offers services, such as engineering, procurement, and construction, retrofits, highway and bridge construction, demolition, site work, soil stabilization, mass excavation, flood control, upgrades, repairs, outages, and maintenance services. The Pipeline Segment offers services, which includes pipeline construction and maintenance, pipeline facility and integrity services, installation of compressor and pump stations, and metering facilities.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Primoris Services Corp has a Value Score of 83, which is considered to be undervalued.

Primoris Services Corp’s price-earnings ratio is 11.6 compared to the industry median at 21.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Primoris Services Corp more attractive for value investors.

Primoris Services Corp’s price-to-book ratio is higher than its peers. This could make Primoris Services Corp less attractive for value investors when compared to the industry median at 2.02.

You can read more about Primoris Services Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Williams Industrial Services Group Inc’s Value Grade

Value Grade:

Williams Industrial Services Group Inc. providers infrastructure services, including construction, maintenance and support, to customers in energy, power and industrial end markets. It provides these services both on a constant presence basis and for discrete projects. Its services include plant maintenance, modification and construction; water/wastewater system new installation, expansions and modifications; painting and coatings; insulation; asbestos and lead abatement; roofing systems; and analog to digital conversions. It provides a range of critical services, including maintenance, modification, repair and other capital project services. It installs, maintains and modifies water and wastewater systems, including piping, pumping, storage tank and other related facilities. It offers cleaning, surface preparation, coatings application, quality control and inspection testing on coating projects for nuclear and fossil fuel power plants, industrial facilities and petrochemical plants.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Williams Industrial Services Group Inc has a Value Score of 88, which is considered to be undervalued.

Williams Industrial Services Group Inc’s price-to-book ratio is higher than its peers. This could make Williams Industrial Services Group Inc less attractive for value investors when compared to the industry median at 2.02.

You can read more about Williams Industrial Services Group Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Construction & Engineering Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Construction & Engineering stocks as well as other industrys.

Choosing Which of the 3 Best Construction & Engineering Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Granite Construction Inc. stock has a Value Grade of B.
• Primoris Services Corp stock has a Value Grade of A.
• Williams Industrial Services Group Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Construction & Engineering industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Construction & Engineering Stocks

Want to learn more about Construction & Engineering stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Construction & Engineering Stocks for Friday, February 24
• 4 Undervalued Construction & Engineering Stocks for Thursday, February 23
• Why Comfort Systems USA, Inc.’s (FIX) Stock Is Up 9.77%
• Why Emcor Group Inc’s (EME) Stock Is Up 10.63%

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