Shares of Dycom Industries Are a Solid Choice for Bargain Seekers

Dycom Industries (DY) , a provider of administrative services to the telecommunication industry, has seen a steep drop in its stock price over the past three months.

The stock's 17% decline contrasts with peers such as MastecPrimoris Services and Quanta Services.

Dycom is a compelling value play right now.

To be sure, strong headwinds as a result of the scaling down of Alphabet-owned Google's Fiber project have affected investor sentiment about Dycom.

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But despite these temporarily appalling numbers, Dycom boasts a high return on equity and remains a stable proposition given its long-term earnings growth prospects and attractive valuations.

Concerns over the Google Fiber project are clearly overblown.

­­Alphabet's assertion about halting the expansion of its Google Fiber program may have hit Dycom shares hard, Google Fiber is not Dycom's principal revenue-driver.

Alphabet contributed only around 6% of Dycom's 2016 total topline, according to KeyBanc analyst Tahira Afzal.

The correction in Dycom's share price made things look unnecessarily bleak, almost as if Alphabet were abandoning the project altogether.

That's unlikely. The release of Google's Pixel line of phones shows that the tech giant considers telecom to be a priority. Since hardware is a new area for Alphabet/Google, the company is probably just being cautious about the rollout.

This is smart strategy since we've seen how tech titans like Apple have faced problems when they branched into self-driving cars.

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What's more, Dycom investors can expect double-digit earnings growth: the company is estimated to grow earnings per share (EPS) by 14% every year for the next five years.

Consider contractor peers to see if Dycom is really offering sluggish growth. Smaller enterprise MYR Group is projected to clock 7% EPS growth in the next half a decade. Primoris is scheduled to grow by 11.25% and MasTec by 14%.

If you look at valuation parameters that adjust for earnings growth, i.e., price/earnings to growth (PEG) ratio, Dycom shares trade at 1.05 (an ideal score is 1). On that scale, MYR Group trading at a PEG ratio of 3.89 (as of Nov. 4 closing), Primoris at 2.29 and MasTec at 1.28 look slightly overvalued compared to Dycom.

With marquee clients like AT&T, ComcastVerizon and Alphabet, Dycom looks equipped for robust growth.

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As themes like virtual reality play out, the demand for faster Internet speeds will propel extensive infrastructure work by telcos. This trigger should help Dycom boost its revenues.

The six investment experts offering 12-month price forecasts for Dycom have a median target of $105, indicating a potential 32% upside from present levels.

With the stock beaten down, but company fundamentals intact, Dycom offers an investment opportunity that you shouldn't pass up.

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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.

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