Hook & thesis
MYR Group's most recent quarter (period ended 09/30/2025) reads like an execution beat: revenues of $950.4m, gross profit of $111.9m and diluted EPS of $2.05 (filed 10/29/2025). Those numbers aren't just bigger - they show better margins and stronger operating cash flow versus the prior quarter. For an electrical contractor whose profit profile has been under pressure, margin recovery matters materially to EPS and free cash flow - and it appears to be happening.
That improvement, plus a modest reduction in long-term debt and a healthy cash flow from operations of $95.6m in the quarter, makes MYR a compelling tactical long. I am upgrading MYR to a buy on a swing (3-6 month) horizon with clear entry, stop, and target levels - this is a trade idea built around margin recovery, balance-sheet progress, and the upside sensitivity of earnings to further margin improvement.
What MYR does and why the market should care
MYR Group, Inc. is a holding company for specialty electrical construction businesses focused on two areas: transmission & distribution (T&D) and commercial & industrial (C&I) electrical work. The business generates the majority of sales in the U.S. and Canada and performs design, engineering, procurement and construction for utilities, large commercial projects and industrial customers.
The market cares because electrical contractors sit at the intersection of secular infrastructure spend (grid upgrades, EV charging, renewables integration) and cyclical construction activity. Small percentage moves in gross margin cascade through to outsized EPS changes because the company operates with relatively low capital intensity and a lean share base - diluted shares in Q3 2025 were ~15.63m, so operating leverage shows up in per-share earnings quickly.
Evidence - the numbers that matter
- Revenue trajectory: Q3 2025 revenues were $950.4m, up from $900.3m in Q2 2025 and $833.6m in Q1 2025. The sequential growth is steady, driven by scale in core project work.
- Margin recovery: Gross profit in Q3 2025 was $111.892m (gross margin ~11.8%), higher than Q2 2025 gross profit of $103.711m (11.5%). Operating income rose to $46.271m in Q3 from $39.787m in Q2 and $34.29m in Q1. Diluted EPS jumped to $2.05 in Q3 vs $1.70 in Q2 and $1.45 in Q1.
- Cash flow & balance sheet: Net cash from operating activities in Q3 2025 was $95.59m - a meaningful beat versus the Q2 run-rate of $32.86m and consistent with the company generating real cash from work-in-progress. Long-term debt fell to $71.98m in Q3 2025 from $86.08m in Q2, indicating de-leveraging or scheduled repayments.
- Profit recovery from prior trough: Compare to the weak quarter in 2024 Q2 (losses recorded in early 2024), the 2025 quarters show a clear recovery path: sequentially higher revenues, expanding operating income, stronger cash generation and a return to positive net income each quarter in 2025.
Put simply: higher margins + higher cash flow = better earnings quality. For a company with ~15.63m diluted shares and a recent share price near $219.16 (prev close), small margin percentage-point gains create meaningful upside to EPS and equity value.
Valuation framing - quick, transparent math
The dataset provides the last reported close (prev day) of $219.16 and diluted average shares in Q3 2025 of 15.631m. Multiplying price by diluted shares implies an approximate market value of equity of roughly $3.43 billion (219.16 * 15.631m). This is a rough market-cap estimate using provided share counts and the most recent close - treat it as directional.
Using Q3 2025 diluted EPS of $2.05 and annualizing it (2.05 * 4 = $8.20) gives an approximate forwardized EPS run-rate; at a $219 price that equates to a P/E of ~27x (219 / 8.2). That multiple is consistent with specialty contractors that have improving margins and strong cash conversion, but it’s not a rock-bottom valuation - the stock already prices some execution forwards. The investment case rests on upside to that EPS run-rate if margins continue to tick higher and cash flow conversion remains strong.
Note: the above uses available price and share-count data to provide a quick sanity check. Full enterprise valuation would incorporate net working capital dynamics and backlog quality, items not consistently disclosed in the dataset we used here.
Catalysts - what could drive the trade higher
- Further margin improvement from sourcing and execution gains - small improvements to gross margin of 100-200 bps would materially lift operating income and EPS.
- Continued strong operating cash flow and further debt reduction - showing free cash flow conversion would reduce financial risk and support multiple expansion.
- Near-term investor engagements: company participation at investor conferences (UBS, Baird, KeyBanc) in late 2025 increases analyst and institutional visibility and could re-rate valuation if management highlights backlog or wins tied to energy transition projects.
- Sector tailwinds - incremental infrastructure or utility spending announcements at the federal or state level that accelerate T&D projects would boost MYR’s addressable market.
Actionable trade plan (Upgrade to Long) - tactical, risk-managed
- Trade direction: Long (upgrade)
- Time horizon: 3-6 months (swing)
- Entry: 212 - 222 (look to accumulate near the current market / first pullback). If buying into a gap up, size down and wait for intraday weakness to add.
- Stop: $195 (roughly 10% below current reference level). A break below $195 would signal a deterioration in sentiment or a reversion in execution confidence.
- Targets:
- Target 1: $255 - represents near-term upside to recent multi-month highs and reflects a ~16% move from entry at 220.
- Target 2 (stretch): $295 - if margins continue improving and operating cash flow accelerates, the market could re-rate toward higher earnings multiples and this target captures a more aggressive re-rating (~35% from entry).
- Position sizing & risk: Limit position to size that risks no more than 1-2% of portfolio on the stop. Use trailing stops if the trade runs in your favor and protect gains at each target.
Risks & counterarguments
At least four meaningful risks could derail this thesis:
- Project execution risk: Electrical construction is execution-heavy. Cost overruns, labor shortages, or project delays could compress margins quickly, reversing the recent recovery.
- Working capital pressure: MYR carries sizeable current liabilities (current liabilities ~ $800.9m in Q3 2025) and accounts payable (~$298.2m). A pick-up in receivable days or disputed change orders could strain cash conversion and force margin concessions.
- Macro / cyclicality: A slowdown in commercial construction or deferred utility spending would reduce revenue visibility and could push backlog conversion materially lower.
- Valuation already reflects some recovery: The stock’s implied market cap (~$3.4bn) and the ~27x forwardized P/E using an annualized Q3 EPS suggest the market has priced some improvement. If execution disappoints, multiple compression could happen quickly.
- Interest rates and capital markets: Higher rates could constrain customer spending on capital projects and make any refinancing more expensive; although long-term debt is relatively modest, the cost of capital matters for multiple expansion.
Counterargument: One could argue MYR already trades at a premium to historical norms and that the stock is sensitive to any rollback in margin recovery. If the market has pre-priced a perfect execution scenario, the upside is limited and downside from a single missed project or large weather event could be steep. That is a valid short-term risk and why this is a tactical, stop-protected trade.
What would change my mind
I would downgrade or close the trade if any of the following occur:
- Margins roll over for two consecutive quarters - particularly if gross profit and operating income decline despite stable revenue.
- Operating cash flow weakens materially - a drop below Q2 2025 levels that isn’t explained by one-time timing items.
- Material negative backlog disclosures or public notices of major project disputes, warranty issues, or claim losses.
Conclusion
MYR Group’s Q3 2025 financials show a credible margin recovery story: sequential revenue growth, expanding operating income, a jump in diluted EPS to $2.05, stronger operating cash flow of $95.6m, and a reduction in long-term debt. Those are the building blocks for a re-rate if management can sustain margin improvements and cash conversion.
This is an actionable, tactical upgrade: enter around the current market on weakness (212-222), protect with a $195 stop, take partial profits at $255 and let a run toward $295 play out if margins continue to improve and cash flow stays robust. Keep position sizing modest, monitor backlog and cash conversion closely, and treat the trade as medium-risk - the upside is tangible but execution risk in construction remains real.
Disclosure: This is a trade idea, not personalized investment advice. Use your own risk limits and consult your advisor as needed.