Company Overview and Goldman Sachs Interest
MYR Group Inc. (NASDAQ: MYRG) is a specialty electrical construction contractor serving electric transmission and distribution (T&D) infrastructure, substations, commercial/industrial projects, and renewable energy facilities across the U.S. and Canada ([1]). The company operates through numerous subsidiaries (~12) and had approximately $3.36 billion in revenue for 2024 ([2]). However, 2024 profitability was unusually soft – with net income only $30.3 million (EPS $1.83) versus $91 million (EPS $5.40) in 2023 – due largely to specific project cost overruns (discussed below) ([2]). MYR Group ended 2024 with a robust backlog of about $2.58 billion, reflecting strong demand for grid modernization and electrification projects ([2]).
Investor interest in MYR Group has grown in recent years. The company’s management (CEO Rick Swartz and CFO Kelly Huntington) presented to institutional investors at Goldman Sachs’ Energy, CleanTech & Utilities Conference in January 2024 ([3]), highlighting the secular growth drivers in utility grid hardening, renewable integration, and data center electrification. Around that time, Goldman Sachs initiated analyst coverage on MYRG with a “Buy” recommendation in December 2023 ([4]). As the stock rallied into 2024, Goldman later downgraded MYRG to “Neutral” by June 2024 while raising its price target from $145 to $168 ([5]) – suggesting the shares had approached Goldman’s revised valuation. (Indeed, MYRG’s stock price climbed from around $100 in early 2023 to about $150 by late 2023 ([1]), and continued to reach the $200+ range in 2025.) Other analysts likewise grew more cautious after the strong run-up – for example, KeyBanc Capital Markets downgraded MYRG to Sector Weight in October 2025 after the stock exceeded their prior $211 target ([5]). In summary, MYR Group’s fundamental growth story around electrification and grid investment has attracted bullish attention, but lofty share price gains have also introduced valuation concerns from some Wall Street observers. With that context, we delve into key aspects of MYRG’s financial profile: dividend policy and capital returns, leverage and debt maturities, coverage ratios, valuation, and the risks/red flags and open questions facing the company.
Dividend Policy, Share Buybacks and Yield
No Ongoing Dividend: MYR Group notably does not pay a regular dividend and hasn’t done so since its 2008 public listing ([6]) ([6]). Management has explicitly stated that the company has never declared or paid cash dividends on its common stock since trading began in August 2008, and they do not expect to initiate dividends in the foreseeable future ([6]) ([6]). This reflects a capital allocation strategy focused on reinvestment and other shareholder return methods rather than cash payouts. As a result, MYRG’s current dividend yield is 0%, and its payout ratio is effectively 0% of earnings ([7]) ([7]). The absence of a dividend means income-focused investors receive no direct yield; however, it also implies that 100% of earnings and cash flow are retained for growth, debt reduction, or share repurchases.
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Share Repurchases: Instead of dividends, MYR Group has used share buybacks as a way to return capital to shareholders when appropriate. The board authorized a $75 million repurchase program in 2022, under which the company repurchased a substantial amount of stock through 2022–2024 and “exhausted substantially all of the available funds” by mid-2025 ([8]). Indeed, MYRG bought back ~442,000 shares in 2022 and smaller amounts in 2023, totaling roughly $75 million in buybacks ([6]) ([8]). In July 2025, the board approved a new $75 million share repurchase program to replace the completed one ([8]). This new authorization extends through February 2026 and will be funded with a mix of cash on hand and borrowings under the company’s credit facility ([8]). Share repurchases have been opportunistic – for instance, significant buybacks in 2022 when the stock was much lower – and help boost shareholder value (and EPS) in lieu of dividends. Notably, MYRG’s share count has decreased modestly over the past few years due to these buybacks (16.74 million outstanding shares as of Feb 2024, down from ~17.2 million in 2021) ([6]). While the company’s no-dividend policy means a 0% dividend yield ([7]) ([7]), investors have benefited from share price appreciation and buyback-driven ownership concentration as the primary “yield.” The open question remains whether MYR Group will eventually initiate a dividend as it matures – but for now, management seems committed to reinvesting and repurchasing over paying cash dividends.
Leverage and Debt Maturities
Low Debt Levels: MYR Group maintains a very conservative balance sheet with minimal debt. As of year-end 2023, the company had only $36.2 million of total debt in the form of borrowings and equipment loans ([6]) ([6]). This consisted of roughly $13.2 million drawn on its revolving credit facility and about $23 million in equipment term notes secured by its vehicle fleet ([6]) ([6]). For context, MYRG’s cash and equivalents weren’t explicitly reported in the press release, but the company had significant unused credit capacity (suggesting cash generation covers operations). By March 31, 2025, MYR Group had $379.4 million of borrowing availability on its $490 million revolver ([9]) – implying around $110 million drawn (inclusive of letters of credit) at that point. Even so, the net debt remains very modest relative to equity (~$548 million shareholder equity as of Q1 2025) ([9]). Overall, MYRG operates at a low leverage ratio; management has at times used excess cash to reduce debt (as seen in 2023 when they paid down revolver borrowings in a high-rate environment) ([6]). The debt-to-EBITDA is well under 1× on a trailing basis, reflecting an under-levered position compared to many peers.
Debt Structure & Maturities: The company refinanced and upsized its credit facility in May 2023 into a five-year Credit Agreement maturing May 31, 2028 ([6]). This revolving credit facility (agented by JPMorgan) provides up to $490 million in borrowing capacity for working capital, capex, acquisitions, etc., at variable interest (SOFR-based) with an applicable margin of ~1.25–2.0% depending on leverage ([6]) ([6]). Importantly, MYRG had only that $13.2 million drawn on the revolver at 2023’s end ([6]), leaving ample liquidity. The facility also allows issuance of letters of credit (about $27 million outstanding L/Cs at 2023’s end) ([6]). In addition to the revolver, MYR Group carries small equipment loans (fixed-rate) that it uses to finance trucks and construction equipment. At 2023 year-end, three equipment notes were outstanding, totaling ~$23 million (down from $27.6 million a year prior) ([6]). These notes amortize gradually – for example, $7.05 million matures in 2024 and $4.36 million in 2025 under the current notes ([6]), with the remainder (~$15.99 million) due in 2026–2028. There are no large “balloon” debt maturities looming; the revolver is the biggest facility and it doesn’t mature until mid-2028, and can likely be extended or refinanced if needed well before then. Overall, MYRG’s debt maturity profile is very manageable – near-term principal obligations are under $8 million per year on the equipment loans ([6]), and the revolver gives flexibility without forcing long-term fixed debt on the balance sheet. In 2024 and 2025, the company actually reduced gross debt slightly as free cash flow was partly applied to pay down borrowings ([6]).
Interest Rate and Covenants: With such low leverage, MYR Group’s interest expense is correspondingly small. In the second quarter of 2025, for instance, interest expense was just $1.9 million for the quarter ([8]), whereas quarterly EBITDA was over $55 million ([8]) – indicating very high interest coverage. Over the first half of 2025, interest totaled ~$3.3 million versus $106 million in EBITDA, again demonstrating that debt service is a trivial portion of cash flows. The credit agreement covenants require a minimum Interest Coverage Ratio of 3.0× and a maximum Net Leverage Ratio of 3.0× ([6]). MYRG easily complied with these covenants (actual coverage far exceeds 3× given EBITDA interest coverage is in the tens of times). Even if interest rates rise, the sensitivity is low – a 1% increase on all revolver debt would reduce pre-tax income by only ~$0.1 million annually ([6]). In sum, MYR Group’s balance sheet is very strong, with minimal leverage, light interest costs, and no short-term refinancing pressures. This conservative financial posture provides capacity to fund growth initiatives (or acquisitions) and to withstand any cyclicality or working-capital swings in its project business. It also grants management flexibility for continued buybacks or strategic investments without jeopardizing stability.
Valuation and Peer Comparisons
Recent Stock Performance: MYRG’s share price has appreciated significantly over the past few years as the company delivered growth (aside from the 2024 profit dip) and as investors bet on secular trends in grid infrastructure. From its 2008 re-listing at ~$16, the stock climbed gradually, then surged in 2023–2025; it reached about $150 per share in 2023 ([1]) and traded above $230 by late 2025. This rally (+>100% over 2023–2025) far outpaced the broader market averages, prompting some analysts to question valuation. The trailing P/E ratio spiked above 80× at the end of 2024 due to that year’s depressed earnings base ([10]). However, this is not reflective of normalized performance. Based on recovery in 2025 earnings, MYRG’s forward valuation is much more reasonable. Sell-side consensus expects earnings-per-share to rebound to ~$6.9 in 2025 (from $1.83 in 2024) ([11]), putting the stock around ~30× 2025e earnings at recent prices. Further growth to ~$8.70 EPS in 2026 is projected ([11]), which would bring the P/E down to ~22× on a forward two-year view – roughly in line with the broader industrial contracting sector. In fact, analysts forecast MYRG’s P/E to normalize to the mid-20s in 2025 and around 22× by 2026 ([10]). This assumes the 2024 stumble was an outlier and that earnings will expand with improved margins (discussed below).
EV/EBITDA and Peers: Looking at enterprise value metrics, MYR Group’s EV/EBITDA was about 20.9× for 2024 (on the trough EBITDA), but is expected to fall to ~15.7× in 2025 and near 13× by 2026 as EBITDA grows back ([11]). These multiples indicate the stock isn’t “cheap,” but they are not uncommon for a company with double-digit growth prospects in a critical infrastructure niche. For comparison, larger peer MasTec, Inc. (MTZ) – which also had earnings volatility – recently traded at ~16× EV/EBITDA and a P/E near 45× (trailing) due to its own transitory profit dip ([10]). Industry leader Quanta Services (PWR) has generally commanded a mid-to-high 20s P/E given its steady growth and scale. Thus, MYRG’s valuation multiples (mid-20s forward P/E, mid-teens EV/EBITDA) appear generally in line with peers, especially considering MYR’s above-average recent backlog growth and improving margins. One could argue MYRG is priced for a lot of good news – the stock now trades at roughly 2.3× book value and nearly 1× annual revenue ([11]), higher than its historical averages. The market is effectively capitalizing the company’s strong backlog and anticipated earnings recovery. Any shortfall in execution or slowdown in project awards could pressure this premium valuation. It’s worth noting that as the stock ran up in mid-2025, investment banks began to temper their ratings: e.g. Goldman Sachs moved to a Neutral stance (target in the mid-$100s) even as it acknowledged MYR’s growth outlook ([5]) ([12]). Likewise, KeyBanc’s October 2025 downgrade cited that the stock had achieved their prior bull-case pricing ([5]). These signals suggest that much of the positive outlook may be “priced in” to MYRG shares at current levels, so future gains will require continued execution on growth and margin improvement.
Key Risks and Red Flags
Despite a positive growth story, MYR Group faces several risks and potential red flags that investors should monitor:
– Project Execution & Margin Risk: MYRG’s 2024 earnings collapse was a stark reminder of execution risk in fixed-price construction contracts. The company suffered losses on certain clean energy projects (utility-scale solar/wind farm connections, etc.) which had higher labor and contract costs, inefficiencies, and even weather issues ([2]). In Q2 2024, MYR reported a $15 million net loss as gross margin plummeted to 4.9% (from 10%+ normal) due to “unfavorable clean energy projects” in the T&D segment and a problematic C&I project ([13]) ([13]). These troubled projects led to contractual disputes and cost overruns that significantly eroded profitability ([2]). While management has stated those specific projects reached completion by late 2024 ([13]), the episode flags a red flag in bidding or project management for renewable energy jobs. The open question is whether such issues were one-off or indicate broader challenges in estimating and executing newer project types (like solar farm grid tie-ins). Going forward, investors will want to see gross margins normalize and evidence that MYRG has tightened project controls or risk contingencies to avoid repeats. Any additional write-downs on projects would quickly undermine confidence, especially now that the stock valuation assumes a return to healthy margins. In short, project execution remains a key risk, and MYR Group’s profitability is not purely recurring – it can swing based on how well contracts are managed.
– Backlog Mix and Volatility: MYR Group’s backlog of ~$2.6 billion is a positive indicator of revenue visibility, but its composition and stability bear watching. The backlog is split between T&D work (e.g. transmission line construction for utilities) and C&I (commercial & industrial projects). A portion is from master service agreements (MSAs) with utilities (recurring maintenance/upgrades), and another portion from one-time project awards (e.g. building a substation or wiring a data center). The risk is that large project awards can be lumpy, and if a few big projects finish without replacement, backlog could dip. Notably, backlog was roughly flat in the past year (around $2.5–2.6 B throughout 2024–25) ([13]) ([8]). Analysts have pointed out “backlog volatility” as a concern ([12]) – for example, if renewable project bookings slowed or if a major contract is delayed, reported backlog might decline and signal a softening pipeline. In 2024, MYRG’s renewable energy-related revenues actually fell (partly by design as they completed those troubled projects). Declining renewables contribution was flagged as a short-term risk by some analysts ([12]). If the company cannot replace those clean energy jobs with new ones (or chooses to be selective after the 2024 issues), growth could rely more on traditional T&D and C&I jobs. While those core areas are robust (utility grid hardening, data center power, etc.), a slowdown in utility capital spending or delays in greenfield renewable projects (due to higher interest rates or regulatory holdups) could impact MYRG’s growth trajectory. In sum, the mix of backlog (recurring vs project-based, T&D vs renewables) and its trend are important – any sustained backlog shrinkage or unfavorable mix shift would be a warning sign.
– Customer Financing and Macroeconomic Factors: MYR Group’s end customers (utilities, independent power producers, large corporations) often fund projects through substantial capital expenditures, debt financing, or equity raises. A tighter economic or credit environment can curtail their spending. The company itself noted that if customers face reduced cash flow or lack access to affordable financing, they may postpone or cancel projects ([6]). With interest rates significantly higher than a few years ago, some utility and renewable energy developers have indeed become more cautious on new construction commitments. A related risk is government infrastructure funding – some of MYRG’s work (e.g. grid modernization, public transit electrification) might be buoyed by government programs. Any delays in government budget appropriations or shifts in policy (for instance, less support for renewables or grid expansion by regulators) could indirectly affect MYRG’s project flow. Additionally, macro labor cost inflation can squeeze margins if fixed contract prices were bid before recent wage increases – MYRG experienced higher labor cost impacts in 2022–24 on certain contracts ([13]). Economic cycles also play a role: while utility T&D spending is relatively defensive, commercial construction can be cyclical. A potential recession or slowdown in private capital spending on industrial facilities (factories, data centers) might dampen MYRG’s C&I segment. Investors should monitor broader indicators of utility CapEx and industrial construction health as they relate to MYR Group’s opportunity set.
– Labor and Workforce Challenges: Execution of MYRG’s projects depends on its skilled labor force of linemen, electricians, and project managers. A large portion (approximately 84%) of MYR’s field labor is unionized under IBEW and other unions ([6]). Labor relations are generally stable, but any work stoppages or strikes could disrupt projects. Moreover, MYR has some non-union businesses, and there have been attempts to unionize those non-union employees – which, if successful, could raise labor costs and create temporary unrest ([6]). The company warns that unionization efforts “often delay work and present risk of labor unrest” ([6]). Additionally, like many contractors, MYRG faces the industry-wide issue of an aging skilled workforce and tight labor supply. If the company cannot recruit and retain qualified craft workers, it may have to pay more or risk project delays. Any spike in labor costs (wages, benefits, multi-employer pension contributions) not priced into contracts can squeeze margins. Safety is another related risk: electrical infrastructure work has hazards; poor safety performance could halt work or increase costs (insurance, legal). So far, MYR Group has a solid safety record, but this remains an area to watch.
– Other Red Flags: Governance and accounting do not present obvious red flags – MYRG’s financials are clean (no goodwill impairments or major restatements, etc.) and the company has been consistently transparent about its non-GAAP metrics like EBITDA. One noteworthy item: MYR’s free cash flow can be volatile due to working capital swings on large projects (e.g. funding inventory and receivables). For 2024, operating cash flow was impacted by project losses and perhaps slower customer payments. The free cash flow yield in 2024 was extremely low (~0.5%) given the profit drop ([11]). However, FCF is expected to normalize as earnings rebound (projected FCF yield ~3.5–4% going forward) ([11]). Investors should keep an eye on cash conversion – strong reported earnings need to translate into cash over time, and any pattern of growing revenues without corresponding cash flow (due to working capital or aggressive revenue recognition) would be a concern. Finally, acquisition risk exists: MYR has grown via small acquisitions (e.g. Huen Electric in 2018, Powerline Plus in 2022). Future M&A could bring integration risks or the assumption of unforeseen liabilities. Management has been disciplined so far, but a large acquisition might introduce new risks or debt.
In summary, MYR Group’s key risks revolve around project execution, cyclical demand, and cost management. The stark decline in 2024 earnings served as a cautionary tale about how quickly things can turn in this business if a few projects go awry. Going forward, investors will be watching for consistent margins, stable backlog growth, and prudent risk management to ensure these issues are behind the company.
Open Questions and Outlook
Given the above analysis, several open questions remain for MYR Group’s investment thesis, especially as the company enters 2026 on stronger footing:
– Have the 2024 Project Issues Been Fully Resolved? Management indicated that the troubled renewable projects were completed by late 2024 and that core operations were healthy aside from those ([13]). An open question is whether MYRG can recover any losses or claims from those projects (since there were contractual disputes ([2])) or if all the write-downs are simply sunk costs. More importantly, investors will want to know what steps MYR Group has taken to improve project bidding and execution. Will the company be more selective on renewable EPC contracts? Are they building in higher contingencies or passing through more material/labor cost fluctuations in contracts? The answer will determine if 2024 was an anomaly or a symptom of a risk that could recur.
– Can MYRG Sustain Margin Improvement? Early 2025 results showed a strong rebound – e.g. Q2 2025 gross margin was 11.5%, back in healthy territory vs 4.9% a year prior ([8]) ([8]), and record quarterly earnings were achieved in Q2 and Q3 2025 ([8]) ([14]). Going forward, is double-digit EBITDA margin sustainable, or were those quarters benefiting from any one-time favorable items (like change orders or project close-outs) ([13])? MYR’s EBITDA margin historically has been mid-single-digits. The company cites a strong bidding environment and internal efficiencies, but investors will watch if the mix of work (T&D vs C&I) affects margins. For instance, transmission projects often have higher margins than commercial building jobs. An open question is what margin level management targets long-term and how they’ll balance growth versus profitability. Consistently improving margins would support the current valuation, while any margin relapse might spook investors.
– What is the Long-Term Capital Allocation Plan? With leverage so low and cash generation resuming, will MYR Group initiate a dividend in the future? Thus far, the answer has been no – they prefer buybacks and growth investments ([6]) ([6]). However, as the company matures and if free cash flow exceeds growth needs, initiating a modest dividend could broaden the shareholder base (appealing to income funds). Management has not signaled any plans for a dividend, but it’s an open question for later years if strong performance continues. In the meantime, the new $75 million buyback indicates they’ll keep repurchasing shares opportunistically ([8]). Another angle: could MYRG pursue larger acquisitions to accelerate growth (e.g. expanding into adjacent services or new geographies)? The balance sheet could support it. Management’s appetite for M&A, and the criteria they’d use, remain key questions – particularly given high valuations in the infrastructure services space.
– How Will Rising Interest Rates and Utility Trends Impact Demand? As noted, some of MYR’s markets are influenced by customer finances. An open question is whether the current high interest rate environment might slow down certain projects – especially renewable energy builds that rely on project financing. Through 2025, MYR’s backlog remained strong, implying continued bid wins ([2]). But if rates stay elevated or if utility capex budgets tighten (some utilities are facing higher debt costs and regulatory pressures), will there be a moderation in new T&D project awards? Conversely, government incentives (e.g. from the Inflation Reduction Act for grid and renewable investment) could counteract that. It’s an area to watch: are utilities and developers deferring any work, or is the grid investment “super-cycle” resilient? The answer will shape MYR’s growth in 2026–2027. Notably, MYR’s management sounded confident about “robust project opportunities” driven by grid modernization, system hardening, and decarbonization trends ([2]) – a view that suggests secular demand remains intact. Investors will look for confirmation via new big contract wins or expansions into emerging areas like EV charging infrastructure or energy storage integration, which could provide incremental growth.
– Is MYR Group’s Valuation Justified by Growth Prospects? The stock’s valuation – ~25× forward earnings – implies the market expects solid, relatively predictable growth ahead. An open question is whether MYRG can continue growing revenue at a high-single to double-digit rate (as backlog execution ramps up) while converting that to proportional earnings growth. The Street consensus for ~8% annual revenue growth through 2028 ([12]) and a near-doubling of net income by 2028 (to ~$157 million) ([12]) encapsulates these expectations. Achieving this likely requires both continual project wins and improved margins (back to 3%-plus net margin from sub-1% in 2024). Any shortfall in growth or slip in execution could lead to a valuation de-rating. Bulls believe electrification and infrastructure spending will provide a long runway for MYRG’s expansion. Bears might argue the easy gains have been made and that competition or normalization of growth could cap upside. This tension – between a robust secular story and execution/valuation risk – remains an open question that only future results will answer.
In conclusion, MYR Group stands at the intersection of powerful industry tailwinds (aging electric grids, renewable energy buildout, data center expansion) and the grounded realities of construction execution. The company’s appearance at a Goldman Sachs conference and the coverage it has received underscore the heightened interest in its story ([3]) ([4]). Moving forward, investors will be scrutinizing whether MYRG can convert its record backlog into profitable growth without repeats of past hiccups. The balance sheet strength and lack of dividend commitment give management flexibility to navigate and invest in growth. If MYR Group can indeed deliver on the anticipated earnings rebound and maintain discipline in project bidding, it could justify its premium valuation and continue rewarding shareholders. On the other hand, execution is paramount – the 2024 stumble serves as a cautionary tale. The next few quarters (and projects) will be critical in demonstrating that MYR Group has truly “turned the corner” and merits its place as a market favorite in the utility infrastructure space. Investors and analysts alike will be watching those results (and management’s commentary) closely for the answers to these open questions.
Sources: Key data and statements sourced from MYR Group’s SEC filings and investor materials, including the 2023 10-K report ([6]) ([6]) ([6]), as well as company press releases on financial results ([2]) ([13]). Industry context and analyst perspectives were drawn from credible financial media and research summaries, such as Goldman Sachs and KeyBanc rating updates ([5]) ([5]), and analysis by Simply Wall St highlighting recent developments ([12]). The report has prioritized authoritative sources – SEC filings, official investor news, and major analyst reports – to ensure accuracy and reliability of the information presented.
Sources
- https://en.wikipedia.org/wiki/MYR_Group_Inc.
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- https://marketscreener.com/news/myr-group-shares-fall-after-keybanc-downgrade-ce7d5bd9d188f12c
- https://sec.gov/Archives/edgar/data/700923/000070092324000008/myrg-20231231.htm
- https://mlq.ai/stocks/MYRG/dividend-yield/
- https://investor.myrgroup.com/news-releases/news-release-details/myr-group-inc-announces-second-quarter-and-first-half-2025
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- https://in.marketscreener.com/quote/stock/MYR-GROUP-INC-3770321/valuation/
- https://simplywall.st/stocks/us/capital-goods/nasdaq-myrg/myr-group/news/how-goldman-sachss-upgraded-outlook-at-myr-group-myrg-has-ch
- https://investor.myrgroup.com/news-releases/news-release-details/myr-group-inc-announces-second-quarter-and-first-half-2024
- https://seekingalpha.com/pr/20285173-myr-group-inc-announces-third-quarter-and-first-nine-months-2025-results
For informational purposes only; not investment advice.
