Costain Group (LSE:COST) is quickly becoming my favorite FTSE share in all. The value has more than doubled in the past year, and this morning (August 21) it was up another 4% after the publication of upbeat results for the first half of the year.

The sharp infrastructure specialist has given investors a bumpy ride in the road in the past, getting caught up in the broader volatility surrounding the outsourcing sector that battered Carillion in 2018.

Contribution to the growth of diminutive companies

Costain’s share price then fell by more than 80% in 2020 as the pandemic disrupted operations and hit profitability. But other problems were of Costain’s own making. Costain lost £90m after adjustments to the Peterborough & Huntingdon and A465 contracts, as well as other exceptional items.

It is now going from strength to strength, with shares up 110.22% in the last 12 months. I bought it on November 29th of last year and have personally gained 60% including dividends. It is one of my top performers.

Costain has just reported an 8.7% rise in adjusted operating profits to £16.3m for the six months to June 30. This was driven by “better results in the Transport segment resulting from a better mix of margins resulting from our contracts and increased volumes” said.

Adjusted operating margins rose 20 basis points to 2.5%. Costain expects them to reach 3.5% in 2024 and 4.5% in 2025. Still very slim, in my view, but at least getting wider (assuming they hit those targets).

Revenue in the first half of the year fell 3.8% to £639.3m, mainly due to the completion of some projects, including major works at Gatwick Station.

However, the group’s position on future work is currently “very healthy” at £4.3bn, after winning deals across all sectors, CEO Alex Vaughan said. He was hopeful enough to announce a £10m share buyback, effective immediately. Given that Costain has a market capitalisation of just over £273m, it is a relatively vast deal.

Dividend income as well

Costain’s revenue will always be up and down, depending on when contracts are awarded and when they are executed. However, this record order book gives investors pretty good visibility into future revenues.

The group also remains vulnerable to macro factors such as the state of the economy and government finances. Money is tight, with Chancellor Rachel Reeves recently removing some infrastructure products.

Costain shares still look inexpensive, trading at 7.75 times earnings, despite this long period. Better still, its net cash balance has risen to £166m. That’s just over 60% of its market value, adding a layer of security.

It earns interest on that cash, which, along with the rise in profit, helped lift adjusted earnings per share by 27.3% to 5.6p. The downside is that interest payments will inevitably fall as the Bank of England cuts base rates.

The projected 1.5% yield isn’t mind-blowing, but it’s still pretty good considering the stock’s recent performance. Shareholder payments are covered 9.1 times by future earnings, leaving plenty of room for growth.

I am delighted to have Costain in my Self-Invested Personal Pension (SIPP) and I expect it to remain my favourite fund for some time.