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Dycom Stock Trades at a Discount to the Industry: Right Time to Buy?

Dycom Industries, Inc. DY is currently trading below the Zacks Building Products - Heavy Construction industry, with a forward 12-month price-to-earnings (P/E) ratio of 24.08, but above the broader Zacks Construction sector. The industry’s average currently is 25.48, while the sector’s valuation is…

Dycom Industries, Inc. DY is currently trading below the Zacks Building Products - Heavy Construction industry, with a forward 12-month price-to-earnings (P/E) ratio of 24.08, but above the broader Zacks Construction sector. The industry’s average currently is 25.48, while the sector’s valuation is 21.59.

Despite trading at a discounted valuation relative to its long-term growth prospects, Dycom is benefiting from powerful secular trends, including accelerating AI-driven data center construction, cloud infrastructure expansion, fiber-to-the-home deployments, wireless network upgrades and government-funded broadband programs.

These demand drivers have fueled a record backlog and prompted management to raise its fiscal 2027 outlook, providing strong multi-year revenue visibility. Supported by expanding margins, strategic acquisitions and growing exposure to high-value digital infrastructure projects, the company's current valuation appears attractive for investors seeking long-term growth.

Shares of this specialty contracting firm, operating in the telecom industry, have gained 13.1% in the past three months, outperforming the industry, the sector and the S&P 500 Index. Notably, during the same time frame, DY has outrun a few of the notable peers, including MasTec, Inc. MTZ, EMCOR Group, Inc. EME and Jacobs Solutions, Inc. J. The price performances can be observed in detail in the chart given below, wherein MasTec is seen with a gain of 9.3%, while EMCOR and Jacobs tumbled 0.2% and 1.6%, respectively.

Let’s decode the factors backing Dycom stock’s growth prospects in the upcoming period.

AI-Driven Digital Infrastructure Demand Trends

Dycom is benefiting from unprecedented investment in AI-driven digital infrastructure, creating a favorable long-term demand environment. Explosive growth in cloud computing, Artificial Intelligence workloads and hyperscale data centers is driving the need for fiber infrastructure, inside-the-fence connectivity, electrical systems and long-haul network deployments. At the same time, fiber-to-the-home expansion, wireless network modernization and government broadband initiatives continue to provide multiple growth avenues.

These favorable trends translated into a record first-quarter fiscal 2027 backlog of $11.9 billion, up 46.5% year over year, with a robust 2.2x book-to-bill ratio, providing strong revenue visibility. Customers are also extending contract durations to secure DY’s skilled workforce for multi-year projects, strengthening backlog quality and positioning it to capitalize on sustained digital infrastructure spending for years ahead. These market tailwinds not only support Dycom but also its close peers, including MasTec, EMCOR and Jacobs.

Margin Expansion & Improving Profitability Outlook

Dycom continues to demonstrate meaningful profitability improvement through disciplined execution, operating leverage and a favorable project mix. First-quarter fiscal 2027 adjusted EBITDA margin expanded 141 basis points (bps) year over year to 13.4%, while the Communications segment delivered a 31-bps margin expansion despite continued investments in workforce expansion and geographic growth. Meanwhile, the Building Systems segment significantly outperformed expectations, generating an impressive 17.7% adjusted EBITDA margin as Power Solutions ramped faster than anticipated.

Management expects profitability to improve further throughout fiscal 2027, with modest margin expansion in Communications driven by operating leverage and sustained high-teen margins in Building Systems. Continued scaling of data center projects, productivity improvements, disciplined project selection, successful integration of acquisitions and expanding higher-value digital infrastructure work are expected to support ongoing earnings growth.

Raised Fiscal 2027 Outlook Signals Sustained Growth

Following a record first quarter of fiscal 2027 that exceeded expectations, Dycom raised its fiscal 2027 outlook, reflecting confidence in both execution and end-market demand. The company now expects total contract revenues between $7.38 billion and $7.65 billion (from $6.85-$7.15 billion), driven by continued strength across Communications and Building Systems segments. Communications segment’s revenues are projected at $6.03-$6.20 billion, while the Building Systems segment is expected to contribute $1.35-$1.45 billion, excluding the pending National Technology Integrators acquisition.

For the second quarter of fiscal 2027, management forecasts revenues of $1.94-$2.01 billion (up from $1.378 billion reported a year ago), adjusted EBITDA of $284-$303 million (up from $205.5 million reported a year ago) and adjusted EPS of $4.40-$4.82 (up from $3.33 reported a year ago). Strong customer commitments, expanding fiber deployments, accelerating data center activity and improving margins support management's increasingly optimistic growth expectations.

Disciplined Capital Allocation

Dycom's balanced capital allocation strategy combines organic investments, strategic acquisitions and shareholder returns to strengthen its competitive position. The company continues investing in workforce development, fleet expansion, technology and operational capabilities while pursuing acquisitions that enhance technical expertise and broaden customer relationships.

The successful acquisition of Power Solutions has expanded Dycom's exposure to the rapidly growing data center electrical contracting market, while the pending acquisition of National Technology Integrators further extends its capabilities into structured cabling, security systems and end-to-end digital infrastructure. These acquisitions create meaningful cross-selling opportunities across communications and building systems, enhancing long-term growth potential. Supported by healthy liquidity, manageable leverage and record backlog, DY remains well-positioned to pursue additional accretive acquisitions while capitalizing on accelerating AI, cloud and broadband infrastructure investments.

Earnings Estimate Trend Favors Dycom

Dycom’s earnings estimates for fiscal 2027 and fiscal 2028 have trended upward over the past 30 days to $16.35 per share and $19.95 per share, respectively. The estimated figures for fiscal 2027 and fiscal 2028 imply year-over-year growth of 36.6% and 22%, respectively.

DY’s ROE Position

Dycom’s superior return on equity (ROE) indicates its growth potential. It provides solid investment returns relative to the industry average, as reflected in its current trailing 12-month ROE of 24.13%. This compares favorably with the industry's ROE of 22.65%. The factor mentioned above indicates the company’s efficiency in using its shareholders’ funds, along with its ability to generate profit with minimum capital usage.

Should You Invest in DY Stock Now?

Dycom stock continues to trade below the industry’s valuation while benefiting from powerful secular growth drivers, including AI-driven data center expansion, fiber-to-the-home deployments, cloud infrastructure investments and government-backed broadband programs. Record backlog, strategic acquisitions and raised fiscal 2027 guidance provide strong revenue visibility, while margin expansion and disciplined execution are expected to drive sustained earnings growth.

Moreover, upward revisions to fiscal 2027 and 2028 earnings estimates, coupled with an industry-leading return on equity, reinforce confidence in the company’s growth trajectory. Although macroeconomic uncertainty and execution risks remain, Dycom’s discounted valuation relative to its long-term prospects offers an attractive risk-reward profile.

Thus, backed by a Zacks Rank #1 (Strong Buy) currently, DY stock remains a compelling buy at current levels rather than waiting for a better entry point. You can see the complete list of today’s Zacks #1 Rank stocks here.

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