NYSE:SGU
STAR GROUP, L.P.
A diversified holding company with strong operational cash flow driven by acquisitions in construction and industrial sectors.
Key Metrics
Investment Thesis
Bull Case
Investors should consider SGU due to its diversified business model that mitigates sector-specific risks and its recent surge in profitability which suggests operational leverage is being realized. The company's strong balance sheet with significant cash on hand provides an excellent platform for opportunistic acquisitions or share buybacks, potentially driving long-term value accretion.
Bear Case
Concerns regarding the cyclical nature of the construction and transportation industries could lead to revenue volatility if a broader economic slowdown occurs. Additionally, the substantial goodwill on the balance sheet and history of frequent acquisitions raise questions about the sustainability of current earnings quality and integration costs.
About STAR GROUP, L.P.
STAR GROUP (SGU) is a diversified conglomerate operating primarily in construction equipment, transportation, and industrial services sectors. The company serves global markets through its extensive network of dealerships and manufacturing facilities, leveraging a vast portfolio of acquired brands to generate revenue across multiple verticals.
Analysis
Management Discussion
Despite a slight revenue contraction in 2024 compared to the previous year, STAR GROUP demonstrated robust profitability with net income more than doubling to $73.5M in 2025. The company maintained healthy operating cash flow of $71.0M while managing substantial capital expenditures and debt repayments, indicating a disciplined approach to capital allocation amidst market volatility.
Industry Overview
The global industrial equipment and services sector is characterized by cyclical demand patterns tied to infrastructure spending and commercial activity. Companies in this space face intense competition but offer stable cash flows through aftermarket services, parts sales, and financing options that provide recurring revenue streams.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue | $1.95B | $1.77B | $1.78B |
| Cost of Revenue | $1.48B | $1.26B | $1.22B |
| Gross Profit | $470.8M | $501.8M | $562.9M |
| Operating Expenses | $408.2M | $440.7M | $448.4M |
| Operating Income | $62.5M | $61.1M | $114.5M |
| G&A | $25.8M | $28.4M | $30.5M |
| D&A | $33.4M | $32.5M | $36.4M |
| Depreciation | $13.8M | $13.5M | $15.3M |
| Amortization | $18.6M | $18.0M | $20.0M |
| Other OpEx | $382.4M | $412.3M | $417.9M |
| Non-Operating Income | $-16.6M | $-12.5M | $-11.6M |
| Pre-Tax Income | $45.9M | $48.6M | $102.9M |
| Income Tax | $14.0M | $13.3M | $29.4M |
| Continuing Ops | $31.9M | $35.2M | $73.5M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $31.9M | $35.2M | $73.5M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $31.9M | $35.2M | $73.5M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Current Assets | $254.7M | $281.5M | $207.3M |
| Cash & Equivalents | $45.2M | $117.3M | $24.7M |
| Accounts Receivable | $114.1M | $95.0M | $102.1M |
| Inventory | $56.5M | $41.6M | $47.0M |
| Prepaid Expenses | $28.3M | $27.6M | $32.7M |
| Other Current Assets | $10.7M | $0 | $790.0K |
| Long-Term Assets | $620.8M | $658.1M | $730.0M |
| PP&E (Net) | $105.4M | $104.5M | $128.6M |
| Goodwill | $262.1M | $275.8M | $293.4M |
| Operating Leases | $90.6M | $91.1M | $93.3M |
| Other LT Assets | $162.6M | $186.6M | $214.8M |
| Total Assets | $875.5M | $939.6M | $937.3M |
| Current Liabilities | $364.9M | $373.8M | $349.2M |
| Accounts Payable | $35.6M | $31.5M | $33.7M |
| Current Debt | $20.5M | $21.0M | $21.0M |
| Current Leases | $18.1M | $19.8M | $19.9M |
| Other Current Liab | $175.1M | $185.1M | $155.1M |
| Long-Term Debt | $127.3M | $187.8M | $167.1M |
| LT Operating Leases | $77.6M | $75.9M | $77.2M |
| AOCI | $-13.5M | $-12.5M | $-11.3M |
| Total L&E | $875.5M | $939.6M | $937.3M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Net Income (CFO) | $31.9M | $35.2M | $73.5M |
| Non-Cash Adjustments | $157.0M | $128.6M | $-1.9M |
| Working Capital Changes | $-65.3M | $-52.9M | $-674.0K |
| Cash from Operations | $123.7M | $111.0M | $71.0M |
| Capital Expenditures | $9.0M | $10.7M | $14.9M |
| Cash from Investing | $-28.2M | $-61.2M | $-99.9M |
| Debt Issuances | — | $210.0M | $0 |
| Debt Repayments | $16.5M | $148.5M | $21.0M |
| Dividends Paid | $23.7M | $25.0M | $26.1M |
| Cash from Financing | $-64.9M | $22.4M | $-63.7M |
| FX Effect | $0 | $0 | $0 |
| Net Change in Cash | $30.6M | $72.1M | $-92.7M |
| Beginning Cash | $14.9M | $45.4M | $117.6M |
| Ending Cash | $45.4M | $117.6M | $24.9M |
Frequently Asked Questions
How does STAR GROUP, L.P. make money?
The company generates revenue through three primary streams: Construction Equipment sales and services, Transportation solutions including automotive parts and logistics support, and Industrial Services encompassing various manufacturing and technology-based operations acquired over time.
What are the main risks for SGU?
1. Cyclical Exposure: Heavy reliance on construction and transportation sectors makes earnings sensitive to economic cycles and interest rate fluctuations. 2. High Capital Intensity: Significant capital expenditures are required to maintain equipment fleets and manufacturing capabilities, impacting free cash flow. 3. Integration Challenges: Continued strategy relies on successful integration of numerous acquired entities, posing operational and cultural risks.
What is SGU's competitive advantage?
1. Diversified Revenue Base: Operating across multiple uncorrelated industries provides stability against sector-specific downturns. 2. Strong Balance Sheet Liquidity: Significant cash reserves and manageable debt levels offer flexibility for strategic acquisitions or capital returns. 3. Acquired Brand Portfolio: Ownership of numerous specialized brands allows for cross-selling opportunities and market penetration without heavy organic R&D costs.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.