MYR Group Inc.: A Hidden Gem in Construction, Undervalued by 14%

The construction sector is booming, driven by surging demand for electric grid modernization and commercial infrastructure projects. Amid this tailwind, MYR Group Inc. (MYRG) stands out as a compelling investment opportunity. Despite its strong financial performance and robust backlog, MYR's stock appears undervalued by 14% based on discounted cash flow (DCF) analysis, while analysts are increasingly bullish on its growth prospects. Let's break down why now could be the right time to invest.

DCF Analysis: A 14% Discount to Intrinsic Value

The DCF model, which estimates a company's value by forecasting future cash flows and discounting them at a required rate of return, suggests MYR is significantly undervalued. Using conservative assumptions—factoring in its first-quarter 2025 EBITDA of $50.2 million, a backlog of $2.64 billion, and a 5% annual growth rate—the intrinsic value of MYR's stock comes out to $192 per share.

As of June 19, 2025, MYR's stock price is hovering around $168 (based on recent trading data), implying a 14% discount to its intrinsic value. This gap suggests investors have yet to fully price in the company's growth trajectory.

Analyst Sentiment: Rising Price Targets Reflect Growing Confidence

Analysts are taking notice. On June 6, 2025, a key analyst raised their price target for MYR to $171, an 8.2% premium to the stock's recent trading price. This revision aligns with MYR's strong first-quarter results, including a 26% year-over-year jump in EBITDA and a 8.9% increase in backlog compared to 2024.

The analyst's optimism isn't misplaced. MYR's backlog—now at $2.64 billion—represents a multi-year pipeline of contracted revenue, insulating the company against near-term volatility. Meanwhile, its $10.9 million in cash and $379.4 million in borrowing capacity provide a solid financial cushion.

Strategic Advantages: Positioning for Long-Term Growth

MYR's focus on electric utility infrastructure and commercial/industrial construction positions it to capitalize on two megatrends:

1. Grid Modernization: Utilities are pouring billions into upgrading aging infrastructure to support renewable energy integration. MYR's expertise in this niche—coupled with its backlog growth—ensures steady revenue streams.
2. Commercial Construction Boom: Rising demand for data centers, warehouses, and industrial facilities is fueling growth in this sector. MYR's backlog in commercial projects grew by 12% year-over-year, signaling strong demand.

Competitors like Everus Construction Group (ECG) and Granite Construction (GVA) have larger market caps ($2.8–4.2 billion), but MYR's 6/6 Financial Health score—reflecting strong liquidity and manageable debt—gives it an edge. Its tangible book value per share of $23.17 further underscores its balance sheet strength.

Why Invest Now?

The case for MYR rests on three pillars:
1. Undervalued Stock: A 14% discount to intrinsic value offers a margin of safety.
2. Strong Backlog: $2.64 billion in contracted work provides visibility and stability.
3. Analyst Catalysts: Rising price targets and sector tailwinds suggest upward momentum.

Risk Considerations

No investment is risk-free. MYR faces headwinds like supply chain volatility and labor shortages, which could pressure margins. However, its ample liquidity and diversified backlog mitigate these risks.

Conclusion: Buy MYR for Value and Growth

MYR Group's combination of a compelling valuation, robust backlog, and strategic positioning in high-demand sectors makes it a standout pick for investors seeking both value and growth. With shares trading at a 14% discount to their intrinsic value and analysts increasingly optimistic, now is an opportune time to add MYR to your portfolio.

Final Takeaway: For investors willing to look beyond the headlines, MYR Group offers a rare blend of undervaluation and long-term growth potential. This could be one of 2025's best construction sector buys.