Over the past six months, Construction Partners’s stock price fell to $113.56. Shareholders have lost 13.5% of their capital, which is disappointing considering the S&P 500 has climbed by 12.9%. This might have investors contemplating their next move.
Given the weaker price action, is now a good time to buy ROAD? Find out in our full research report, it’s free.
Why Is ROAD a Good Business?
Founded in 2001, Construction Partners (NASDAQ:ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Construction Partners’s 32.4% annualized revenue growth over the last five years was incredible. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Construction Partners’s EPS grew at 34.5% compounded annual growth rate over the last five years, higher than its 32.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
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 8.8 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 5.9%.
Final Judgment
These are just a few reasons why we think Construction Partners is an elite industrials company. After the recent drawdown, the stock trades at 33.2× forward P/E (or $113.56 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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