$STRL · Mark Roussin, CPA · 2026-11-01

And this is a company I've discussed before because I believe it provides a compelling way to still participate in the physical AI infrastructure buildout. When most investors think about AI, they think about Nvidia, AMD, Broadcom.

But those advanced chip companies, they need to operate somewhere. And we know the demand for data centers, electrical infrastructure, site development, and specialized construction. That's where Sterling comes in.

On the year shares of Sterling, they're up nearly 10%. But that doesn't tell the whole story. This was a company that was up over 100% at one point in terms of share price. But that is when things were really getting ahead of themselves and since then have needed to be re-calibrated, but maybe a bit too much. The business is still booming.

Sterling's e infrastructure business provides services for major missioncritical projects including the likes of data centers and semiconductor manufacturing facilities and the growth has been extraordinary.

The company reported dynamite Q3 results that saw revenues grow 127%. Adjusted EPS it grew 118%. E infrastructure revenues grew 212% and operating cash flow reached 427 million. that was up nearly 70% compared to the last year through the third quarter.

You are starting to see things match up. Companies like the hyperscalers are confirming they are still spending on AI and those budgets are increasing and that spending is going towards new builds that Sterling helps bring to fruition.

Here's a look at the company's backlog which reached approximately 4 billion. And look at that growth.

Now, I always remind investors that backlog isn't the same thing as generated revenue. Projects again can be delayed like we talked about with Boeing. Costs can change and customers can adjust their plans, but a growing backlog can provide important visibility into future demand.

And I believe Sterling is benefiting from a powerful infrastructure investment cycle.

Now, the stock does not come without risk. If hyperscalers eventually reduce data center construction, Sterling could experience pressures. But again, I don't think that time is now.

And large construction projects carry execution risks. But when I look at the demand trends being discussed from the likes of Alphabet, Microsoft, and Amazon, and when they're telling us that how much they're spending now, and those budgets are increasing, I look at a company like Sterling, and they're going to benefit.

Looking at it now, from a valuation perspective, I think things look very interesting for an industrial play. We're talking about shares that are trading at a forward PE of just 14 and a half times.

Meanwhile, earnings are expected to grow 28% next year and 20% the following year. Meanwhile, analysts remain very bullish, giving the stock an average 12-month price target of $777 a share, implying a doubling from current levels.

Now, that may be a little more optimistic than I am, but here's a look at a recent price target adjustment from a key analyst where they took it up to $500 per share, implying 35% upside from current levels.

This was an adjustment that was made after the company just reported, so taking it into fruition. This is yet another way to play the AI buildout story from an industrial standpoint.

and Sterling benefits from the large-scale construction and data center development.