A building company worth investing in is Galliford Try

Galliford Try, a construction company, has increased its dividend by four times, but from a valuation standpoint, the stock is still appealing

A construction company that has succeeded is Galliford Try (LSE: GFRD). It is a UK-based business that specializes in building prisons and schools, among other projects. Building and facility construction and renovation, operating infrastructure (mainly roads and sewage systems), and offering specialized services (like maintenance) comprise its three business segments. This organizational structure, which consists of three divisions, guarantees that the group is not overly reliant on a single project or service type and prevents it from falling into the opposite trap of becoming dispersed or unfocused.

An attractive long-term outlook is provided to investors by the construction industry. The majority of major economies urgently need to replace or repair their aging infrastructure in order to make up for decades of underinvestment. In addition, there is a persistent housing shortage in many nations, particularly the UK. However, the industry is not risk-free. Cost overruns are a common occurrence for construction companies, and short-term volatility in the housing market can also have an impact on home builders.

Galliford Try is buying everything he can.

Galliford intends to increase its efforts in affordable housing and has strengthened its business by purchasing a number of smaller companies in related fields. The government has prioritized building more affordable housing, so this is a smart move. The group's large order book and high rate of repeat business indicate that its customers are satisfied with the quality of service it is offering and provide some protection against a downturn in the economy. Galliford intends to continue growing sales while also attempting to increase its margins through a combination of volume growth, high efficiency, and concentrating on more lucrative work. Between 2021 and 2025, Galliford's revenue increased by over two thirds, and its adjusted earnings per share more than doubled. It has also been able to increase the efficiency with which it uses its capital. It now has a return on capital employed that is well over 20%. Consequently, the company was able to increase its dividend by four times.

The article goes on below.

Check out six complimentary BFIA issues now.

Get unmatched financial analysis, insight, and professional advice that will benefit you.

Start your trial Despite this achievement, the stock still appears appealing from a valuation standpoint, trading at a more than reasonable 13.4 times projected 2027 earnings with a respectable 4.1 percent dividend yield.

The share price has increased by about half in the last year due to Galliford's strong operational performance, promising future prospects, and favorable valuation. Over the past six months, the stock has outperformed the market as a whole and is currently trading above both its 50-day and 200-day moving averages. As a result, I would advise you to go long at the current price of 538p at 5p per share. If so, I would set the stop-loss at 340p, giving you a 990p total downside.