LMB

Limbach Holdings ($LMB) Board Divided: Director Gaboury Goes 'All In' on Buying Despite 27% Plunge

08/13/2025 20:22

Limbach Holdings ($LMB) is sending mixed signals to investors. While the stock has plummeted 27% from its July peak of $149 to $109 over the past month, reinforcing the high volatility typical of small-cap stocks, contrasting investment decisions within the board of directors are drawing attention. Limbach Holdings, founded in 1901 and based in Pennsylvania, is a specialized building systems solutions provider offering mechanical, electrical, and plumbing (MEP) services to healthcare facilities, educational institutions, and data centers. The 1,300-employee company operates through two main segments: General Contractor Relationships (GCR) and Owner Direct Relationships (ODR), with a strategic goal to expand the higher-margin ODR segment from its current 48.5% to 70% of total revenue. Director David Gaboury's purchase of 1,400 shares at $106 per share on August 12 represents a continuation of his consistent buying pattern. Gaboury has been steadily accumulating shares since September 2024, purchasing at $62.20 on September 5, $72.70 on September 12, and $94.51 on December 10. This sustained buying throughout the stock's upward trajectory demonstrates strong confidence in the company's long-term prospects. His recent purchase is particularly significant as it occurred during a major price correction. In stark contrast, Director Joshua Horowitz has been on the opposite side of the trade. He has conducted large-scale sales since June 2024, including a massive disposal of 25,400 shares at $75.43 per share on March 14, 2025, generating approximately $1.92 million. Horowitz's sales are conducted through indirect ownership via Palm Global Small Cap Master Fund, suggesting portfolio rebalancing from a fund management perspective. However, the scale and persistence of sales clearly indicate profit-taking intentions at peak price levels. CEO Jay Sharp also sold 2,000 shares at $137.06 per share on June 13, executed under a 10b5-1 trading plan adopted on March 14. This represents a routine cash monetization strategy tied to restricted stock unit (RSU) exercises, with an additional 3,194 shares scheduled to vest on January 1, 2026. Amid these contrasting insider trading patterns, the company's fundamentals remain robust. Second-quarter results showed revenue increasing 16.4% year-over-year to $142.24 million, with net income growing 30% to $7.76 million. Earnings per share of $0.67 beat analyst expectations by 2.4%, while operating margins continue to improve. The company raised its annual revenue guidance to $650-680 million and adjusted EBITDA guidance to $80-86 million. The July 1 acquisition of Pioneer Power for $66.1 million also represents positive growth momentum. The acquired company is expected to contribute $120 million in revenue and $10 million in EBITDA by 2026. To fund the acquisition, Limbach expanded its revolving credit facility to $100 million, enabling growth strategy execution without equity dilution. However, Spruce Point's short recommendation issued on July 22 served as a direct catalyst for the stock's sharp decline. While specific short thesis details weren't disclosed, negative opinions from short-selling firms carry significant weight for small-cap stocks. Additionally, valuation pressure mounted as the stock reached $149, creating correction momentum. Limbach's current valuation metrics show a forward P/E of 31.55x and PEG ratio of 2.29x, which appear reasonable for a growth stock. With projected annual revenue growth of 15%, premium valuation relative to industry averages seems justified. Strong capital efficiency metrics including ROE of 23.26% and ROA of 8.83%, combined with a healthy debt-to-equity ratio of 31.89%, support the investment thesis. Investors should focus on the ODR segment growth trajectory. Expanding ODR revenue share from 48.5% to 70% could significantly improve margin structure, as ODR margins of 27.1% far exceed GCR margins of 12-15%. The third-quarter earnings report scheduled for November 4 will provide clarity on progress in this area. Gaboury's persistent buying could signal bottom formation. As one of the most informed insiders, his purchases during significant price corrections carry meaningful weight. Conversely, while Horowitz's sales appear driven by fund management considerations, the substantial scale could create short-term price pressure. At current price levels, the risk-reward ratio is improving. With a 27% correction from the $149 peak and continued fundamental improvement trends, this could present an attractive entry opportunity. However, small-cap volatility, short-seller presence, and construction industry cyclicality remain risk factors. The November earnings report, ODR segment growth rates, and acquisition synergy realization will be key variables determining future stock direction.