Limbach Holdings, Inc.NASDAQ:LMB) experienced significant revenue growth, driven primarily by the outstanding performance of the ODR and GCR segments. A significant improvement in the company’s gross margin was noted, leading to a notable increase in gross profit. Moreover, the company achieved a noticeable increase in net income, supported by effective management of operational expenses and strategic planning. This section expands on the discussion started in previous article, providing an analysis of Limbach Holdings following its Q3 2023 earnings report. It delves into a detailed technical examination of the stock’s performance to uncover potential investment avenues. The share price maintains a strong uptrend, consistently trading in overbought zones. Despite this, the bullish price pattern remains stable, signaling the potential for continued bullish momentum.
Financial growth for Limbach Holdings
Limbach’s consolidated revenue rose to $127.8 million, a 4.4% increase from the reported $122.4 million in Q3 2022. This growth was primarily driven by the ODR segment, which saw a 10.3% increase in revenue to $65.8 million. GCR segment revenue remained stable, contributing to the company’s overall top line growth. The company’s consolidated gross margin improved significantly, rising to 24.45% from 20.3% a year ago. This increase translated into a gross profit of $31.24 million, up from $24.9 million. The ODR and GCR segments experienced margin improvements attributable to favorable contract mixes and efficient project management. The steady increase in gross profits over the past few years reflects the company’s increased profitability.
Limbach’s growth strategy included successful acquisitions, namely ACME Industrial and Industrial Air. These acquisitions match the company’s criteria, increasing its market presence and expanding its operational scope. Selling, general and administrative (SG&A) expenses increased to $20.97 million, primarily due to increased payroll and professional fees. Despite this, the company posted a substantial net income of $7.192 million, a notable increase from $3.6 million in Q3 2022, as shown in the chart below. This is partly attributed to efficient management of operating expenses and strategic financial planning.
Despite higher interest rates, Limbach’s interest expenses decreased due to a lower overall debt balance. Also, the company earned $0.4 million in interest income, benefiting from investments in various financials the instruments. of The company’s adjusted EBITDA witnessed significant growth, reaching $13.6 million, 33.6% more than a year ago, reflecting strong operational efficiency and effective cost management. Additionally, net cash from operating activities increased to $17.2 million. The company’s balance sheet remained stable, with cash and cash equivalents of $57.5 million and a current ratio of 1.57x. This financial stability is further highlighted by a notable increase in working capital to $77.7 million.
In summary, Limbach Holdings showed a notable increase in consolidated revenue and gross margin in Q3 2023, with consolidated revenue increasing to $127.8 million and gross margin improving to 24.45%. These gains are attributed to strong performance in the ODR and GCR segments, efficient project management and favorable contract mixes. Together with strategic acquisitions and effective financial management, these factors have increased Limbach’s market presence and strengthened its financial stability, as evidenced by significant growth in net income, adjusted EBITDA and a strong balance sheet.
Deciphering Sustained Bullish Momentum
of previous article highlighted the strong bullish trend in Limbach Holdings, focusing on the monthly and weekly charts. The stock was observed to be forming an impressive inverted head and shoulders pattern, with a major breakout above the $16 neckline. This development has caused a significant increase, suggesting a potential for further price increases, even in overbought conditions. The weekly charts confirmed these overbought conditions, with the RSI showing overbought. However, given the strength of the long-term price trajectory, continued price growth was expected. The weekly charts also highlighted the inverted head and shoulders formation and the stock’s approach to resistance levels, hinting at possible price consolidation.
The next move
The stock has entered a strong uptrend, aligning with expectations and climbing to higher levels. The long-term quarterly chart below shows significant price swings through 2022 and 2023, highlighting the apparent volatility. This volatility is particularly evident in the quarterly candles of 2023. In particular, the last quarter of 2023 has featured a strong quarterly candle, ending the year on a high note. Prominent growth on the quarterly chart can be traced to 2018 lows of $3.56, 2020 lows of $2.37 and 2022 lows of $4.90, with a move above $16, implying an upside scary and suggests possible upward trends ahead.
The revised monthly chart from the previous article shows highlighted monthly candles for November and December 2023, suggesting that the year is likely to end on a high note. Despite recent overbought conditions, the price structure shows continued bullish momentum.
Diving into the uptrend, the weekly chart below shows the stock’s trajectory inside a red channel, near a significant resistance area. A corrective phase in September and October 2023 reached $26.76 along the blue trend line, leading to another market rally above record highs. The weekly chart structure, featuring an inverted head and shoulders pattern, with the head at $4.90 and the shoulders at $5.83 and $6.28, underscores continued bullish momentum in the market despite overbought conditions.
Interestingly, the short-term daily chart below captures bullish momentum, marked by a rounding bottom with a low at $26.76. Investors may consider increasing long positions in anticipation of further upward momentum.
The extraordinary growth for Limbach Holdings brings market risks, especially in an environment of economic volatility. The company’s reliance on the ODR and GCR segments may be vulnerable to economic downturns. In a rapidly changing economic landscape, any sign of an economic slowdown or sector-specific challenges could adversely affect investor sentiment and Limbach’s stock performance. While the long-term trend remains positive, with an impressive inverted head and shoulders pattern suggesting continued price growth, there is a risk of a market correction due to overbought conditions. A slight pullback could be seen as a chance to buy, but if prices fall below $26, it could increase the likelihood of further downside momentum.
In conclusion, Limbach Holdings’ financial and operational performance in Q3 2023 has been solid, characterized by significant revenue, gross margin and net income growth, driven primarily by the strong performance of the ODR and GCR segments. Strategic acquisitions and efficient management of operational expenses further strengthen this financial success. However, regardless of the upward trends in the performance of its shares, investors should be aware of the inherent risks of the market, especially in an unstable economic environment. The appearance of an inverted head and shoulder indicates strong bullish price structures. Additionally, strong quarterly candles and a strong 2023 close highlight continuation of strong bullish momentum into 2024. Investors may consider buying Limbach Holdings if the share price stays above $26.