Construction Partners has been on fire lately. In the past six months alone, the company’s stock price has rocketed 71.2%, reaching $126.32 per share. This run-up might have investors contemplating their next move.
Following the strength, is ROAD a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Are We Positive On Construction Partners?
Founded in 2001, Construction Partners (NASDAQ: ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.
1. Projected Revenue Growth Is Remarkable
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.
Over the next 12 months, sell-side analysts expect Construction Partners’s revenue to rise by 30%, close to its 25.1% annualized growth for the past five years. This projection is eye-popping and indicates the market sees success for its products and services.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Construction Partners’s EPS grew at an astounding 17.7% compounded annual growth rate over the last five years. This performance was better than most industrials businesses.
3. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Construction Partners’s margin expanded by 5.1 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Construction Partners’s free cash flow margin for the trailing 12 months was 6.9%.
Final Judgment
These are just a few reasons why Construction Partners ranks highly on our list, and after the recent surge, the stock trades at 46.7× forward P/E (or $126.32 per share). Is now a good time to buy despite the apparent froth? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More Than Construction Partners
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