# Dycom: a record $12.2 billion backlog, and free cash flow that has not shown up yet DY, NYSE. Published October 23, 2026. Price as of the October 22, 2026 regular session close. ## Verdict: HOLD at $225.16 Do not add. Dycom has a record backlog and the shares are 60% below their high, but the price is still 15.8% above the Base value, and free cash flow in the first half was negative. The buy zone starts at $116.67. - Bear value: $91.20 - Base value: $194.45 - Bull value: $357.38 - Downside to base value: -13.6% - Maximum buy price: $116.67 - Required margin of safety: 40% - Probability-weighted value: $209.37 (25/50/25) - Growth implied by the price: about 9.8% revenue growth a year for five years (Base 6.3%) - Dividend: none - Business quality: 55/100 - Valuation score: 42/100 - Confidence: 14/25, grade C In the first half of fiscal 2027 Dycom earned $206.9 million and generated negative $54.2 million of free cash flow, because receivables rose to $2.28 billion from $1.70 billion in six months. The same release reports a record backlog of $12.2 billion, up 53%. The shares are 60% below their 52-week high and hit a new low this week. The question is which of those numbers the price should believe. At $225.16 on October 22, 2026, the shares trade 15.8% above my triangulated Base value of $194.45, a downside of 13.6% to Base. The Bull value of $357.38 is 58.7% above the price and the Bear value of $91.20 is 59.5% below it. The required margin of safety of 40% puts the maximum buy price at $116.67. For existing holders the framework verdict is to hold. New money should wait. Third-quarter results are due in mid-November. Valuation route: Industrials and infrastructure services, applied to a specialty contractor for telecommunications networks and, since December 2025, data center electrical work. Economic classification: Standard Company (4/12), because the return on capital is below 15% and cash conversion has been unreliable. Two methods carry equal weight: mid-cycle EV to normalized EBITDA and a ten-year cash flow model. Reference checks: historical and peer multiples, and a reverse calculation of what the price assumes. Values are present fair-value estimates, not 12-month price targets. ## What Dycom is Dycom builds and maintains the physical networks of the large telecommunications companies: fiber to the home, long-haul and middle-mile fiber, wireless sites and maintenance work. Communications was 80% of second-quarter revenue. Building Systems, 20%, is new: Power Solutions, an electrical contractor for data centers and critical facilities in the Washington, D.C. area, was acquired on December 23, 2025 for $2.01 billion, and National Technology Integrators, a structured cabling and security contractor, joined in the second quarter for $271 million. Concentration is the defining feature. AT&T and Verizon each exceeded 10% of second-quarter revenue. As a share of receivables and contract assets, Lumen was 13.4%, AT&T 11.0%, Verizon 10.7% and Charter 9.1%, together 44%. Dycom does not choose its customers' capital budgets, and when they slow spending, it feels it first. ## The latest quarter | Q2 fiscal 2027 (quarter ended August 1, 2026) | Result | | --- | --- | | Revenue | $2.006 billion, up 45.6% (16.7% organic); Building Systems contributed $397.5 million | | Adjusted EBITDA | $315.5 million, 15.7% of revenue, up 81 basis points | | Segment margins | Communications 13.6%, down 134 basis points; Building Systems 24.5% | | GAAP / adjusted EPS | $3.81 / $5.29 (prior year $3.33 / $3.64) | | Backlog | $12.24 billion, up 53.2%; $6.47 billion expected within 12 months, up 40.6% | | Cash flow | Operating cash flow $103.7 million and free cash flow $37.9 million in the quarter; first half free cash flow negative $54.2 million | | Net debt | $2.50 billion (cash $340 million, debt $2.84 billion) | | Fiscal 2027 guidance (raised) | Revenue $7.48 to $7.66 billion; about $150 million of wireless revenue deferred into fiscal 2028 | | Q3 guidance | Revenue $1.90 to $1.98 billion; adjusted EBITDA $281 to $302 million; adjusted EPS $4.33 to $4.79 | Revenue was $3.131 billion in fiscal 2022, $3.808 billion in 2023, $4.176 billion in 2024, $4.702 billion in 2025 and $5.546 billion in 2026, a compound growth rate of 15.4% over four years, though only 6.5% of the fiscal 2026 growth was organic. Consensus expects $7.58 billion in fiscal 2027 and $8.58 billion in fiscal 2028. ## Why the current earnings are not the whole story The first reason is cash. Over fiscal 2023 to 2025 Dycom earned $594 million and generated $103 million of free cash flow, about 17% of earnings, because growth consumed working capital. Fiscal 2026 reversed that, with $402 million, and the fourth quarter alone produced $367 million. The first half of fiscal 2027 reversed it again. Days sales outstanding were 101, down from 108, but receivables are $2.28 billion against $1.70 billion at the start of the year. Cash conversion at Dycom is seasonal and lumpy, and a valuation has to look through it. The second reason is the adjustments. Adjusted EPS of $5.29 compares with GAAP EPS of $3.81, because the adjusted figure excludes amortization of acquired intangibles, which was $60.5 million in the quarter. Anyone quoting a forward P/E of 13x on adjusted earnings is leaving out a $240 million annual expense that is real, if non-cash. Adjusted EBITDA also adds back stock compensation of about $38 million a year; I count it as a cost. The third is margin quality. The Communications margin fell to 13.6% and management expects it to decline slightly for the year. Building Systems earned 24.5%, which management attributes partly to favorable cost estimate changes, and guides to the high teens or low twenties for the rest of the year. A first-half margin of 14.6% is not a run rate. ## Balance sheet and shares Notional debt is $2.84 billion: $500 million of 4.50% notes due April 2029, a $1.54 billion Term Loan A due December 2030, an $800 million Term Loan B due January 2033, and an undrawn revolver. Cash is $340 million and liquidity $1.09 billion. Net debt of $2.50 billion is 2.6 times trailing adjusted EBITDA of about $960 million (fiscal 2026 $737.7 million plus the first half of fiscal 2027 less the first half of 2026). Net interest expense was $38.0 million in the quarter, against $15.6 million a year earlier, a run rate of about $152 million a year. I hold back $150 million of cash as an operating reserve, so net financial claims in the model are $2.65 billion. Goodwill and intangibles are $2.53 billion, about 39% of total assets. Shares outstanding were 30.16 million on August 24, 2026, up from 29.97 million at the start of the year, because the two acquisitions were paid partly in stock (1.1 million shares for Power Solutions and NTI together). I use 30.4 million diluted shares, a market value of $6.84 billion and an enterprise value of about $9.5 billion. That is 9.9 times trailing adjusted EBITDA and 8.8 times my estimate of fiscal 2027 adjusted EBITDA of about $1.07 billion (first half actual, Q3 at the guidance midpoint, Q4 at a 12.3% margin). ### Cash flow in three levels Leverage is high enough that deducting interest alone would not be a safe check, since the run-rate interest bill is about 18% of pre-financing operating cash flow and $500 million of notes mature inside the horizon. For the Base case in fiscal 2028: | Base case, fiscal 2028 | Amount | | --- | --- | | Cash flow before financing (after tax, capital spending and working capital) | about $515 million | | After interest of about $150 million, taxed at 25% | about $400 million | | After scheduled debt repayment of $28 million | about $375 million | If the Base plays out and the free cash flow goes to debt, net debt falls from 2.6 times today to about 1.9 times at the end of fiscal 2027 and about 1.5 times a year later. The valuation uses the cash flow before financing and subtracts net debt, which is consistent with that path. ## Valuation: two methods, equal weight The first method is mid-cycle EV to normalized adjusted EBITDA. The second is a ten-year cash flow model on stock-compensation-adjusted cash flow. Each runs through Bear, Base and Bull, and each gets half the weight. | Scenario | Normalized EBITDA | EV to EBITDA | Multiple method | Cash flow model | Weighted value | | --- | --- | --- | --- | --- | --- | | Bear | $800 million | 8.0x | $123.27 | $59.13 | $91.20 | | Base | $1,000 million | 9.0x | $208.80 | $180.10 | $194.45 | | Bull | $1,250 million | 11.5x | $385.61 | $329.16 | $357.38 | The Base normalized EBITDA of $1,000 million is about 13% of a $7.7 billion revenue base. It is 4% above trailing EBITDA of $960 million and 7% below my fiscal 2027 estimate of $1.07 billion, which includes a Building Systems margin that management itself expects to ease. **Why 9x.** The industrial framework puts standard companies at 8x to 12x and quality compounders at 12x to 18x. A 9x multiple is a standard-tier multiple, in the lower half. On $1,000 million of EBITDA it is a free cash flow yield of about 5.5% on roughly $493 million of normalized cash flow before financing, which at a 10% discount rate pays for perpetual growth of about 4.3%. That is still a fairly generous assumption, and the cash flow model, which fades growth to 2.5% after ten years, is the stricter check. The peers EMCOR and Primoris trade at 14.5x and Comfort Systems at 19.1x. I do not give Dycom those multiples: its customers are four telecom companies, leverage is 2.6 times, cash conversion has been poor in three of the last four years, and a screener puts its return on invested capital at 9.6%. At 14.5x the multiple method would give about $390, and that is the size of the bet that the discount is wrong. The cash flow model starts from fiscal 2028 revenue of $8.25 billion, 9% above the guidance midpoint for fiscal 2027 and 4% below consensus, and grows 7%, 6%, 5%, 4.5%, 4%, 3.5%, 3%, 3% and 2.5%. EBITDA after stock compensation starts at 13.3% of revenue and fades to 12.2%. It uses a 10% discount rate, a 25% cash tax rate on EBITDA less depreciation (ignoring any tax shield from amortization of intangibles, which is conservative), net capital spending of 3.2% of revenue and working capital of 15% of each incremental dollar of revenue. It also adds $500 million of cash flow from the second half of fiscal 2027, which the company has yet to report. Consensus free cash flow of $559 million for the year implies about $670 million before interest for the second half; I use about 25% less. Terminal value is 47.7% of Base enterprise value. ## Common basis and why the two methods differ | Base case | Cash flow model | Multiple method | | --- | --- | --- | | Enterprise value | $8.13 billion | $9.00 billion | | Implied EV to normalized EBITDA | 8.1x | 9.0x | | Net financial claims (after the cash reserve) | $2.65 billion | $2.65 billion | | Equity value | $5.48 billion | $6.35 billion | | Value per share (30.4 million diluted) | $180.10 | $208.80 | The gap is $0.87 billion of enterprise value, or $28.70 a share, and it comes from the same place as it did elsewhere in this series: how long growth lasts. The multiple method implicitly keeps about 4.3% growth forever; the cash flow model drops to 2.5% after ten years, an exit at about 7.0 times year-ten EBITDA. Because the debt is a fixed claim, a small difference in enterprise value moves the equity by a larger percentage. The divergence is 14.8%, inside the framework's 20% limit. ## Historical and peer cross-check On trailing GAAP earnings of $10.99 a share the stock trades at 20.5x, 18% below a ten-year median of 25.0x from a data provider (its lookback window is unclear, so treat it loosely). On consensus adjusted EPS of $17.05 for fiscal 2027 it trades at 13.2x, and on $20.78 for fiscal 2028 at 10.8x; both exclude amortization of acquired intangibles. A screener PEG ratio of 0.5 is a diagnostic only, because the growth includes two acquisitions. | Peer reference | Dycom | Sterling | Comfort Systems | EMCOR | Primoris | | --- | --- | --- | --- | --- | --- | | EV to EBITDA | 10.6x | 15.8x | 19.1x | 14.5x | 14.5x | | Forward P/E | 12.9x | 16.6x | 20.4x | 18.4x | 17.0x | | Operating margin | 8.1% | 18.1% | 16.7% | 9.6% | 3.0% | | Return on invested capital | 9.6% | 41.7% | 100.4% | 36.8% | 6.7% | Figures are from a third-party data provider on October 22 and 23, 2026, and the peers were moving that morning. Dycom trades at a clear discount to the group on multiples, with a lower margin and a lower return on capital than all but one peer. The discount is real, but it is not obviously a bargain. ## Valuation triangulation | Method | Base value | Weight | | --- | --- | --- | | Mid-cycle EV to EBITDA at 9x | $208.80 | 50% | | Ten-year cash flow model | $180.10 | 50% | | Triangulated Base | $194.45 | 100% | Divergence is 14.8% in the Base case and 15.8% in the Bull case. In the Bear case it is 70.3%, far above the framework's 30% flag, because with $2.65 billion of net claims on roughly $4 to $6 billion of enterprise value, equity is a thin slice and swings sharply with small changes in method. Read the Bear as a range of $59 to $123 rather than a point. Terminal value is 41.5%, 47.7% and 55.7% of enterprise value in the Bear, Base and Bull cash flow models. ## What is the market already pricing in? Run the cash flow model backwards and the price needs revenue to grow about **9.8% a year for five years** from the fiscal 2027 guidance midpoint, reaching roughly $12.1 billion in fiscal 2032, against $10.3 billion in the Base (6.3% a year), with Base margins. Put differently, Base cash flows would have to be 1.17 times higher every year. At 9x, the price implies mid-cycle EBITDA of about **$1.06 billion**, against $1.0 billion in the Base and about $1.07 billion for fiscal 2027. The market is paying 9x for this year's earnings, with no discount for the margin easing that management itself describes. This is not an extreme bet: organic growth was 16.7% last quarter, and consensus has 13% for next year. If the Base cash flows play out and the shares are bought at $225.16, the return on the enterprise is about 7.7% a year, short of the 10% required. ## Bear, base and bull scenarios | | Bear | Base | Bull | | --- | --- | --- | --- | | Probability | 25% | 50% | 25% | | Fiscal 2028 revenue | $7.3 billion | $8.25 billion | $8.8 billion | | Normalized EBITDA | $800 million | $1,000 million | $1,250 million | | EV to EBITDA | 8.0x | 9.0x | 11.5x | | Discount rate | 10.5% | 10% | 9% | | Value per share | $91.20 | $194.45 | $357.38 | | vs $225.16 | -59.5% | -13.6% | +58.7% | **Bear:** one or two large customers slow fiber or wireless spending, revenue slips below the fiscal 2027 level in fiscal 2028 and grows only 1% to 3% after that, EBITDA margins fall to 10.5% and working capital absorbs 20 cents of each new revenue dollar. I trim the multiple by one turn to 8x and raise the discount rate by half a point; I do not stack every pessimistic input, because a cyclical contractor that earns less already gets a lower value through lower EBITDA. **Base:** revenue grows 9% in fiscal 2028 and then fades toward the pace of the economy, with margins easing from 13.3% to 12.2%. **Bull:** the digital infrastructure build-out outruns even consensus, revenue passes $14 billion by fiscal 2037, and margins stay near 13% to 14%. The probability-weighted value is **$209.37**, 7.0% below the price. ### Sensitivity: multiple method, value per share | Normalized EBITDA \ Multiple | 7.5x | 9x | 10.5x | | --- | --- | --- | --- | | $850 million | $122.45 | $164.39 | $206.33 | | $1,000 million | $159.45 | $208.80 | $258.14 | | $1,150 million | $196.46 | $253.20 | $309.95 | Three of the nine cells are above today's price, all of them with at least $1.0 billion of EBITDA and a 9x or higher multiple. ### Sensitivity: cash flow model, value per share | Discount rate \ Terminal growth | 2.0% | 2.5% | 3.0% | | --- | --- | --- | --- | | 8% | $259.20 | $275.45 | $294.96 | | 9% | $209.84 | $220.41 | $232.75 | | 10% | $172.90 | $180.10 | $188.33 | | 11% | $144.24 | $149.31 | $155.02 | | 12% | $121.37 | $125.04 | $129.12 | Only the 8% row and the 9% discount rate with 3% terminal growth reach the price. The result depends heavily on the discount rate for a company that carries this much debt. ## How the buy price is set Confidence C starts at a 35% margin of safety. Five points are added for customer concentration, leverage and the swings in working capital, for 40%. A 40% discount to the $194.45 Base gives a **maximum buy price of $116.67**. Applied to each method separately, the same margin gives $108.06 for the cash flow model and $125.28 for the multiple method. ## Dividend Dycom pays no dividend. Cash goes to acquisitions, debt service and buybacks, which were $36.0 million in the first half. Income is not a thesis driver. ## Reasons to own DY - **Visible demand.** Backlog of $12.24 billion is up 53%, and $6.47 billion of it is expected within 12 months. Organic book-to-bill was 1.4 times for the year to date. - **Organic growth is real.** 16.7% in the second quarter and 20.5% in the first half. About $150 million of wireless revenue moved into fiscal 2028, and the company says the program scope is unchanged. - **Data center exposure.** Building Systems adds electrical and cabling work in a market where peers earn 14.5x to 19.1x, with guided margins in the high teens or low twenties. - **Cash that has arrived before.** Fiscal 2026 free cash flow was $435 million by the company's measure, and the fourth quarter alone was $367 million. - **A big fall already.** 60% below the high, at 20.5 times trailing GAAP earnings against a ten-year median of 25.0 times. ## What could go wrong? - **Customer concentration.** Four customers are 44% of receivables and contract assets, and two exceed 10% of revenue. - **Working capital.** Receivables were $2.28 billion at the end of the quarter, and free cash flow was negative in the first half for the second year running. - **Margins.** Communications margin fell 134 basis points and is guided slightly lower; the Building Systems margin includes favorable cost estimate changes. - **Leverage and refinancing.** $2.84 billion of debt, $500 million of notes due April 2029, and an interest bill that more than doubled in a year. - **Deferrals and timing.** About $150 million of wireless revenue moved into fiscal 2028, and fuel prices are a cost pressure. - **Acquisition integration.** $2.28 billion paid for two companies in a year, with goodwill and intangibles about 39% of assets. - **Accounting presentation.** Adjusted EPS excludes amortization and is 39% higher than GAAP EPS in the quarter. - **Valuation.** The price already assumes growth near 10% a year for five years. ## Management execution Management has delivered organic growth and raised guidance, and the release calls the first half a record for organic revenue. It is also true, and in the same release, that the half produced negative free cash flow. Capital allocation has been aggressive: $1.64 billion of cash and 1.0 million shares for Power Solutions, then $226 million of cash and 0.1 million shares for NTI, funded with debt, stock and a cash balance that fell from $709 million to $340 million. The only management commentary in the release is a short statement from the CEO, and I have not seen the call transcript. Management and capital allocation scores **6/10**. ## Stock Analyza scorecard | Business quality | Score | | --- | --- | | Moat | 10/20 | | Economic return | 8/20 | | Balance sheet | 9/15 | | Cash flow quality | 6/15 | | Growth and runway | 12/15 | | Management and capital allocation | 6/10 | | Dilution and governance | 4/5 | | Total | 55/100 | The valuation score is **42/100**: the price is above the Base, the Bear and the probability-weighted value, but the gap to Base is moderate and the Bull value is 59% above it. | Economic classification | Points | | --- | --- | | Normalized return | 0/2 | | Revenue growth | 2/2 | | FCF per share growth | 0/2 | | Balance sheet | 0/1 | | Unit economics | 0/1 | | Repeat economics | 1/2 | | Reinvestment runway | 1/2 | | Standard Company | 4/12 | ## Confidence score | Confidence | Score | | --- | --- | | Data quality | 4/5 | | Predictability | 2/5 | | Valuation robustness | 3/5 | | Accounting transparency | 3/5 | | Scenario dispersion | 2/5 | | Total | 14/25, grade C | ## What I would watch from here ### Green - Total backlog above $12.2 billion, with next-12-month backlog above $6.4 billion - Communications adjusted EBITDA margin at or above 13.5% - Free cash flow for the fiscal year above 80% of net income - Receivable days at or below 101 and net debt below 2.5 times EBITDA - Fiscal 2027 guidance maintained or raised ### Yellow - Total backlog of $10.5 to $12.2 billion - Communications margin of 12% to 13.5% - Free cash flow at 40% to 80% of net income - Receivable days of 102 to 110 and net debt of 2.5 to 3.0 times EBITDA - Guidance held but not raised, further revenue deferred ### Red - Total backlog below $10.5 billion - Communications margin below 12% - Free cash flow below 40% of net income - Receivable days above 110 or net debt above 3.0 times EBITDA - Guidance cut, or a top customer announcing a spending reduction The next review point is third-quarter results for the quarter ending October 31, 2026, expected in mid-November; a data provider lists November 18. Guidance is revenue of $1.90 to $1.98 billion, adjusted EBITDA of $281 to $302 million and adjusted EPS of $4.33 to $4.79. The fourth quarter is where cash conversion showed up last year. ## The three most important thesis breakers 1. A major customer cutting fiber or wireless capital spending. 2. Margins continuing to slide in Communications while the Building Systems margin returns to the mid-teens. 3. Working capital staying a drag, with free cash flow far below earnings and leverage rising. ## Stress test and independent check The whole model was recomputed separately in high-precision arithmetic and matched to the cent. Three judgments were tested because they move the answer. The $500 million of second-half cash flow is the largest single input: at $250 million the Base cash flow value falls to $171.98, at $650 million it rises to $184.97. Ignoring the tax shield from amortization is conservative; including it would raise the value by roughly $6 a share. And holding back $150 million of cash lowers the Base by about $5 compared with counting all of it. The strongest counter-argument is that Dycom is not a cyclical contractor in this cycle but the utility-like builder of a decade of fiber and data center capacity, that $12.2 billion of backlog is worth more than a 9x multiple recognizes, and that working capital is a timing problem that reverses in the fourth quarter, as it did last year. If that is right, the Bull value of $357.38 is the better guide, and the shares are a bargain after a 60% fall. I cannot verify that from the filings, and the three weak cash years before 2026 argue the other way. | Robustness test (cash flow model) | Value per share | | --- | --- | | Base | $180.10 | | Tax rate 28% | $168.56 | | Working capital 25% of incremental revenue | $165.78 | | Capital spending 4.0% of revenue | $148.08 | | All margins 1.5 points lower | $135.07 | | All margins 3 points lower | $90.04 | | Cash flows 20% lower in every year | $126.63 | | Cash flows 40% lower in every year | $73.16 | | Starting from consensus fiscal 2028 revenue of $8.58 billion with 13.8% margin | $194.48 | | Consensus revenue, Bull margins, lower working capital and capital spending, 9% discount rate, 3% terminal growth | $341.43 | Operating leverage works both ways: three points of margin is the difference between $90 and $180. Only the combination of consensus revenue with several favorable assumptions at once clears the price by a wide margin. Main data limits: revenue shares by customer, the call transcript, the second-half cash flow and the terms of the term loans are not available, and the third quarter has not been reported. ## Final verdict: hold at $225.16, do not add Dycom is a growing contractor with a record backlog and a stock that has already lost 60%. But the price is still above the Base value, the cash flow has not yet followed the earnings, and a company with four customers and 2.6 times leverage deserves a wide margin of safety. **Verdict: HOLD at $225.16, do not add, WATCHLIST for new money. Triangulated Base value $194.45, downside 13.6%, Confidence C (14/25). Required margin of safety 40%, maximum buy price $116.67.** For an existing holder, a smaller gap to Base, the record backlog and a Bull value 59% above the price support holding through the third-quarter print. New money waits for $116.67 or below, or for evidence that the fourth quarter turns the first-half cash outflow into the fiscal 2027 free cash flow that consensus expects. The main thesis breaker is a pullback by one of the four customers that account for 44% of receivables. ## More analyses on Patreon This analysis is free. Premium members get every in-depth analysis, the full archive and a vote on which stocks get analyzed next: https://www.patreon.com/stockanalyza ## Sources Primary sources include Dycom's [second-quarter fiscal 2027 results release](https://dycomind.gcs-web.com/node/20776/html), the [August 2026 Form 10-Q](https://www.sec.gov/Archives/edgar/data/0000067215/000006721526000043/dy-20260801.htm) and the [fiscal 2026 fourth-quarter results](https://www.sec.gov/Archives/edgar/data/67215/000006721526000004/dyfy2026q4earningsreleasee.htm). Consensus estimates, historical multiples, peer multiples, financial history and the market price come from third-party data providers. The reference market price is $225.16, the October 22, 2026 regular session close. Balance sheet figures are as of August 1, 2026. **Disclaimer.** This analysis is provided solely for research and educational purposes. It is not personalized investment, financial, legal or tax advice. Values are estimates, not forecasts or trading instructions. Dycom Industries is exposed to customer concentration, working capital swings, leverage and valuation risk. Investors can lose part or all of their invested capital. Method: Master Investment Analysis Framework v3.5. Approach: Mid-cycle EV to EBITDA and a ten-year cash flow model at equal weight, with reverse and peer checks. Confidence: C/14. Data checks: passed with warnings. Open data gaps: revenue shares by customer, the earnings call transcript, second-half cash flow, term loan terms and the third-quarter results due in mid-November.