One of my favourite ways to do stock picking is to identify companies which have a high level of free cash flow yield, together with a good level of growth. This combination is probably the reason why a company, like SKS Technologies (electrical contractor) has done so well recently. We can also find similar profiles in the construction sector. One example is Shape (SHA), which has a significant free cash flow yield and a large growth of its order book.
Of course, the difficulty in both cases, is to try to guess how sustainable are these trends, both regarding order book growth and free cash flow. In the case of SKS, there is probably a good visibility for its growth, which is now linked to the growth of the data center sector.
Both companies have a limited level of recurring business. But they also claim to have a high level of their business coming from existing customers : 96 % of repeat business according to SKS and 80 % according to Shape.
