Construction Partners (ROAD) AI Stock Analysis

373 Followers

Top Page

Construction Partners

(NASDAQ:ROAD)

72Outperform

The overall score reflects a robust financial profile with significant revenue growth and strategic acquisitions, supporting long-term optimism. However, the high valuation and technical indicators suggest cautious short-term sentiment. The company's strong earnings call further boosts confidence, yet high P/E ratios and overbought technical signals might deter some investors.

Positive Factors

Acquisitions

ROAD's acquisition of Lone Star Paving, the largest in company history, and its entrance into the large and growing Texas markets is incrementally positive.

Backlog

Backlog remains at record levels with a backlog of $1.960B, increased +5.4% QOQ and +22.5% YOY, remaining at a record level.

Demand Environment

Management continues to describe a robust demand environment, benefiting from the IIJA and strong state fiscal support, with no change to positive outlook for the company's favorably-exposed Southeast private sector market activity.

Negative Factors

Backlog Duration

LSP's backlog has a larger average duration from subcontracted work, which causes its backlog to burn slower.

Financial Performance

F4Q24 pre-release could have been worse with ROAD's revenue and net income down from previous guidance.

Construction Partners (ROAD) vs. S&P 500 (SPY)

Market Cap

$3.85B

Dividend YieldN/A

Average Volume (3M)561.18K

Price to Earnings (P/E)65.4

Beta (1Y)1.26

Revenue Growth22.91%

EPS Growth-1.39%

CountryUS

Employees1,325

SectorIndustrials

Sector Strength64

IndustryEngineering & Construction

Share Statistics

EPS (TTM)1.07

Shares Outstanding47,183,598

10 Day Avg. Volume471,099

30 Day Avg. Volume561,179

Financial Highlights & Ratios

PEG Ratio1.59

Price to Book (P/B)N/A

Price to Sales (P/S)2.08

Price to Cash Flow (P/CF)25.40

P/FCF Ratio74.70

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$102.00

Price Target Upside46.70% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering4

Construction Partners Business Overview & Revenue Model

Company DescriptionConstruction Partners, Inc. (NASDAQ: ROAD) is a leading infrastructure and road construction company based in the United States. The company specializes in the construction and maintenance of roadways and provides a range of services, including asphalt paving, site development, and road construction. Serving both public and private sector clients, Construction Partners operates primarily in the southeastern region of the U.S., establishing itself as a key player in the infrastructure sector.

How the Company Makes MoneyConstruction Partners primarily generates revenue through contracts for road construction and maintenance services. The company's key revenue streams include government-funded infrastructure projects, where it acts as a contractor for state and local governments, as well as private sector projects for commercial developers. Revenue is often recognized based on the progress of construction projects, with payments typically received in installments as work is completed. Key factors contributing to earnings include strong relationships with government agencies, strategic acquisitions to expand market presence, and efficient management of project costs and resources.

Construction Partners Financial Statement Overview

Summary

Construction Partners demonstrates solid financial health with strong revenue growth and effective cash flow management, despite slight declines in profitability margins. The low debt levels and robust equity position provide a stable financial foundation. Strategic improvements in cost management could further enhance profitability and shareholder returns.

Income Statement

Very Positive

Construction Partners shows strong revenue growth with a TTM (Trailing-Twelve-Months) increase of 9.06% compared to the previous year. Gross and net profit margins are healthy at 14.23% and 2.82% respectively. The EBIT margin stands at 5.41%, indicating efficient operational control. However, the TTM net profit margin has decreased compared to the previous annual report, suggesting room for improvement in cost management.

Balance Sheet

Positive

The company's balance sheet is stable with a debt-to-equity ratio of 0.10, reflecting low leverage and financial stability. The equity ratio is strong at 31.59%, indicating a solid financial base. Return on equity is at 6.91%, suggesting moderate profitability for shareholders. While the financial leverage is low, there's potential to enhance ROE through improved net income.

Cash Flow

Very Positive

Operating cash flow is robust, substantially exceeding net income with an operating cash flow to net income ratio of 3.38, indicating strong cash generation capability. Free cash flow growth is negative at -16.34%, reflecting higher capital expenditures. Despite this, the free cash flow to net income ratio is 1.81, showing effective cash flow management.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
1.99B	1.82B	1.56B	1.30B	910.74M	785.68M
	Gross Profit
282.95M	258.25M	196.38M	139.30M	119.94M	122.21M
	EBIT
107.59M	111.24M	81.88M	35.41M	30.10M	55.23M
	EBITDA
157.36M	111.24M	157.13M	99.13M	84.48M	92.85M
	Net Income Common Stockholders
56.04M	68.94M	49.00M	21.38M	20.18M	40.30M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
51.09M	74.69M	48.24M	35.53M	57.25M	148.32M
	Total Assets
0.00	1.54B	1.22B	1.10B	806.62M	628.11M
	Total Debt
0.00	66.29M	390.73M	389.83M	222.87M	99.65M
	Net Debt
51.09M	-8.40M	342.48M	354.30M	165.62M	-48.66M
	Total Liabilities
0.00	968.39M	703.09M	639.64M	397.72M	242.92M
	Stockholders Equity
156.28M	573.74M	516.57M	455.88M	408.90M	385.19M
Cash Flow		Free Cash Flow
101.39M	121.15M	59.35M	-52.35M	-7.83M	52.60M
	Operating Cash Flow
189.36M	209.08M	157.16M	16.50M	48.50M	105.17M
	Investing Cash Flow
-881.95M	-307.58M	-143.37M	-197.33M	-263.41M	-79.36M
	Financing Cash Flow
755.95M	126.11M	-264.00K	159.14M	123.85M	41.89M

Construction Partners Technical Analysis

Technical Analysis Sentiment

Negative

Last Price69.53

Price Trends

50DMA

74.78

Negative

100DMA

83.87

Negative

200DMA

75.01

Negative

Market Momentum

MACD

-0.46

Negative

RSI

48.18

Neutral

STOCH

27.30

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ROAD, the sentiment is Negative. The current price of 69.53 is below the 20-day moving average (MA) of 73.14, below the 50-day MA of 74.78, and below the 200-day MA of 75.01, indicating a bearish trend. The MACD of -0.46 indicates Negative momentum. The RSI at 48.18 is Neutral, neither overbought nor oversold. The STOCH value of 27.30 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ROAD.

Construction Partners Risk Analysis

Construction Partners disclosed 53 risk factors in its most recent earnings report. Construction Partners reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Construction Partners Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
STRL	76 Outperform	$3.21B	13.19	36.08%	―	7.28%	85.63%
PRIM	75 Outperform	$2.84B	15.89	13.67%	0.53%	11.40%	42.51%
ROAD	72 Outperform	$3.85B	65.44	8.41%	―	22.91%	-1.39%
GVA	70 Outperform	$3.13B	29.95	12.68%	0.72%	14.20%	191.86%
IESC	70 Neutral	$3.21B	15.47	37.89%	―	23.09%	102.01%
Sector *	62 Neutral	$7.16B	12.21	3.08%	3.43%	3.62%	-14.48%
DY	61 Neutral	$4.03B	17.85	20.35%	―	12.61%	7.43%

* Industrials Sector Average

Performance Comparison

ROAD

Construction Partners

69.53

12.68

22.30%

Dycom

140.69

-1.12

-0.79%

GVA

Granite Construction

71.89

16.38

29.51%

IESC

IES Holdings

165.12

39.59

31.54%

PRIM

Primoris Services

53.76

8.08

17.69%

STRL

Sterling Construction

113.83

7.80

7.36%

Construction Partners Earnings Call Summary

Earnings Call Date: Feb 7, 2025 | % Change Since: -17.69% | Next Earnings Date: May 9, 2025

Earnings Call Sentiment Positive

The earnings call presented a positive outlook with record-breaking revenue and strong growth metrics, despite some challenges such as acquisition-related expenses impacting net income. The strategic acquisitions and robust market conditions contribute to a strong growth trajectory.

Highlights

Record Revenue and Growth

CPI reported a record revenue quarter with a year-over-year growth of 42% and record backlog of $2.66 billion.

Strong EBITDA Performance

Adjusted EBITDA increased by 68% compared to the first quarter of fiscal 2024, with margins growing by almost 200 basis points.

Successful Acquisitions

CPI acquired Oberlin Corporation and Mobile Asphalt Company, expanding its market presence in Oklahoma and Alabama.

Positive Market Conditions

Strong demand for infrastructure services in the Sunbelt, with public infrastructure funding increasing year-over-year by approximately 16%.

11% Organic Growth

The company achieved an 11% organic growth rate this quarter, highlighting its focus on expanding current market operations.

Lowlights

Net Loss Due to Acquisition Expenses

Net loss of $3.1 million during the quarter, attributed to non-recurring expenses related to a transformative acquisition.

Decreased Cash Provided by Operating Activities

Cash provided by operating activities was $40.7 million compared to $60 million in the same quarter a year ago, due to weather-related changes affecting cash collections.

Company Guidance

During the Construction Partners conference call for the first quarter of fiscal 2025, management provided guidance and key metrics highlighting a strong start to the fiscal year. Revenue increased by 41.6% year-over-year to $561.6 million, with organic growth contributing 11.2% and acquisitions contributing 30.4%. The EBITDA margin improved by almost 200 basis points year-over-year, reaching 12.3%. The company reported a record project backlog of $2.66 billion, indicating strong demand for infrastructure services. Management revised its outlook for fiscal 2025, projecting revenue between $2.66 billion and $2.74 billion, with adjusted EBITDA expected to be around $335 million. Additionally, they highlighted recent strategic acquisitions, such as Oberlin Corporation and Mobile Asphalt Company, which are expected to contribute $120 million to $130 million in revenue for the fiscal year. Overall, Construction Partners remains optimistic about its growth prospects, supported by a healthy acquisition pipeline and robust market conditions in the Sunbelt region.

Construction Partners Corporate Events

M&A TransactionsBusiness Operations and Strategy

Construction Partners Expands with Mobile Asphalt Acquisition

Positive

Feb 3, 2025

On February 3, 2025, Construction Partners, Inc. announced the completion of its acquisition of Mobile Asphalt Company LLC, adding five hot-mix asphalt plants and associated crews and equipment in the Mobile and southwestern Alabama market areas. This acquisition marks a significant expansion of Construction Partners’ operations in the region, enhancing its presence and aligning with economic growth driven by the Port of Mobile and coastal development. The acquired business will operate as a new branded division under Wiregrass Construction Company while maintaining the Mobile Asphalt Company name.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.