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To compare construction companies using EV/EBIT, calculate enterprise value on the same basis for each company, divide it by EBIT from a matched reporting period, and compare only genuinely similar contractors. Then examine the debt-and-cash bridge, the quality of EBIT, and what each company actually counts as backlog. A larger backlog is not automatically better: it may include work at different award stages, take years to convert, be canceled or reduced, or fail to earn the expected margin.
What EV/EBIT tells you—and what it does not
Enterprise value (EV) represents the value of a company’s debt, common equity and preferred equity, less cash and investments under the chosen convention. EV/EBIT divides that enterprise-wide value by earnings before interest and taxes. It can help compare companies with different capital structures, but the ratio does not explain by itself why one contractor trades at a higher multiple. CFA Institute’s 2026 curriculum discusses enterprise-value multiples and peer comparisons in its Market-Based Valuation: Price and Enterprise Value Multiples and Equity Valuation: Concepts and Basic Tools materials.
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A lower EV/EBIT is not automatically evidence that a stock is cheap. Lower margins, weaker growth prospects, execution exposure, cyclical earnings or balance-sheet risk may help explain the discount. Treat the multiple as a starting point for investigation, not a verdict.
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Build a consistent EV/EBIT comparison
Before comparing multiples, make sure each company’s numerator and denominator are measured consistently. Record the inputs and conventions rather than relying on an unexplained data-provider figure.
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- Choose comparable companies. Define the peer set by geography, project type, company size and business mix. A contractor focused on one market or type of work may not be comparable to a diversified peer.
- Set the dates. Use a common valuation date for share prices and market capitalization, and identify the reporting period used for EBIT. Avoid mixing current market values with mismatched or stale earnings periods without saying so.
- Bridge equity value to EV. Start with market capitalization and consistently account for debt, preferred equity, minority claims where applicable, cash and investments. State how leases and other capital claims are treated. The exact convention is an analytical choice; use the same one across the peer set.
- Choose and label EBIT. State whether EBIT is reported or adjusted and how unusual items are treated. Use a matched period and flag negative, unusually low or cyclical EBIT: in those cases, EV/EBIT can be uninformative or swing sharply.
- Calculate and investigate. Divide EV by EBIT, then assess leverage, liquidity, earnings quality and backlog characteristics before explaining any gap between companies.
Debt affects EV even though EBIT is calculated before interest expense. Two contractors with similar operating earnings can therefore have different EV/EBIT ratios because their debt and cash positions differ. Market capitalization alone is not a substitute for EV; show the bridge and the convention so the comparison can be checked.
Read backlog as a company-specific measure
Backlog is reported forward work, not a standard promise of future earnings. Companies may use different definitions, and labels such as “backlog,” “remaining performance obligations” and “awards” should be treated as company-specific until reconciled. For each contractor, investigate:
- Definition and award status: Does the figure include signed contracts only, or also low bids, options, task orders or other awards? A submitted low bid is not equivalent to a signed contract.
- Conversion timing: When is the work expected to become revenue, and what portion is expected to convert over the next year? A large balance scheduled over several years says something different from near-term work.
- Business and contract mix: Review segments, public versus private customers, end markets, fixed-price exposure and customer concentration. These affect the risks behind the headline amount.
- Execution and cancellation exposure: Consider delays, scope changes, termination rights, input costs and project performance. Reported work can be reduced, canceled or delayed.
- Profitability: Backlog is commonly expressed as expected revenue, not guaranteed profit. Check disclosed project margins and cost-to-complete exposure where available; revenue conversion does not ensure the expected earnings.
Why company backlog figures are not a league table
Recent filings illustrate why backlog needs its definition, date and composition alongside the amount. The figures below are company-reported examples, not a like-for-like ranking or industry benchmark.
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|---|---|---|
| Tutor Perini Corporation, 2025 Form 10-K filed in 2026 | Approximately $20.6 billion as of December 31, 2025; the company estimated approximately $6 billion, or approximately 29%, would be recognized as 2026 revenue. | The filing breaks backlog out by segment, customer type and contract type, and warns that cancellations or scope reductions can occur and that backlog may not produce expected profit. Tutor Perini’s 2025 Form 10-K. |
| Sterling Infrastructure, Inc., 2025 Form 10-K filed in 2026 | $3.01 billion as of December 31, 2025, compared with $1.69 billion as of December 31, 2024. | Sterling says its remaining performance obligations on projects, as defined under ASC Topic 606, do not differ from what it calls backlog. It says projects are typically completed in 6 to 36 months and substantially all contracts contain termination-for-convenience clauses. Sterling’s 2025 Form 10-K. |
| Construction Partners, Inc., 2025 annual report | Approximately $3.0 billion as of September 30, 2025. | Its contract backlog can include projects for which it has submitted the currently lowest bid. The company says backlog can be revised or canceled and may not be profitable. Construction Partners’ annual reports and filings. |
| Granite Construction Incorporated, 2025 annual report | A directly comparable single backlog figure is not stated in the cited material. | Granite reports unearned revenue separately from other awards and describes criteria for including some probable options and task orders. Reconcile these categories before comparing its work pipeline with another company’s backlog. Granite Construction’s annual reports. |
These disclosures show why the label alone is insufficient: dates, award criteria, timing and contract categories differ. Tutor Perini explicitly cautions in its filing, “We may not fully realize the revenue value reported in our backlog due to cancellations or reductions in scope, including as a result of government-related mandates.”
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Put the multiple and backlog together
Use backlog to test the plausibility and visibility of future activity, not to convert a reported amount directly into an earnings forecast. A higher backlog may support confidence in future revenue only to the extent that work is likely to proceed, convert on a relevant timetable and earn adequate margins. The backlog evidence should help explain the business behind a multiple; it cannot replace consistent valuation inputs or evidence about profitability.
- If one company’s EV/EBIT is lower, check whether weaker margins, uncertain execution, lower-quality awards or balance-sheet risk plausibly account for the difference.
- If one company reports faster backlog growth, check the definition, date, mix and expected conversion before treating that growth as a superior outlook.
- If EBIT is unusually depressed or volatile, qualify the ratio rather than treating a mechanically low or high value as a dependable ranking.
For any live company comparison, refresh market inputs and use the latest available filings, with valuation and backlog dates stated clearly. This method is educational, not individualized investment advice.
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