Construction Partners, Inc. (NASDAQ: ROAD)

Sector: Industrials Industry: Engineering & Construction CIK: 0001718227
Market Cap 7.43 Bn
P/B 7.67
P/E 60.89
P/S 2.43
ROIC (Qtr) 7.30
Div Yield % 0.00
Rev 1y % (Qtr) 44.14
Total Debt (Qtr) 1.84 Bn
Debt/Equity (Qtr) 1.90
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About

Construction Partners, Inc., a Delaware corporation and often referred to as ROAD, is a civil infrastructure company that specializes in the construction and maintenance of roadways across Alabama, Florida, Georgia, North Carolina, South Carolina, and Tennessee. The company operates through its wholly-owned subsidiaries, providing a variety of products and services to both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports, and commercial and residential developments. Construction Partners' main business...

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Investment thesis

Bull case

  • Robust free cash flow of 208.11M exceeds capital expenditure of 125.10M by 1.66x, indicating strong organic growth funding capability.
  • Strong operating cash flow of 333.21M provides 1.54x coverage of SG&A expenses 216.53M, showing efficient operational cost management.
  • Tangible assets of 2.20B provide exceptional 15.04x coverage of deferred revenue 146.44M, showing strong service capability backing.
  • Operating cash flow of 333.21M provides solid 0.66x coverage of current liabilities 508.23M, showing strong operational health.
  • Robust tangible asset base of 2.20B provides 7.32x coverage of working capital 300.89M, indicating strong operational backing.

Bear case

  • Operating cash flow of 333.21M barely covers its investment activities of (844.01M), with a coverage ratio of -0.39, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Cash reserves of 104.19M provide limited coverage of acquisition spending of (716.05M), which is -0.15x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 494.86M relative to inventory of 170.02M (2.91 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating earnings of 260.81M show weak coverage of depreciation charges of 162.12M, with a 1.61 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 162.12M relative to operating cash flow of 333.21M, which is 0.49x suggests significant maintenance capital requirements affecting free cash flow.

Peer comparison

Companies in the Engineering & Construction
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 PWR Quanta Services, Inc. 106.68 Bn 648.31 32.06 6.02 Bn
2 FER Ferrovial SE 55.08 Bn 200.50 6.30 -
3 FIX Comfort Systems Usa Inc 49.32 Bn 2,267.37 36.14 0.39 Bn
4 EME EMCOR Group, Inc. 37.37 Bn 40.34 2.63 0.42 Bn
5 MTZ Mastec Inc 20.82 Bn 62.89 1.51 2.77 Bn
6 APG APi Group Corp 18.43 Bn 118.16 2.41 3.05 Bn
7 J Jacobs Solutions Inc. 16.19 Bn 37.39 1.31 2.96 Bn
8 BLD TopBuild Corp 15.63 Bn 27.53 2.98 3.09 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.67 1.87
EV to Cash from Ops. EV/CFO 26.89 36.37
EV to Debt EV to Debt 4.87 14.13
EV to EBIT EV/EBIT 34.36 119.20
EV to EBITDA EV/EBITDA 21.16 40.20
EV to Free Cash Flow [EV/FCF] EV/FCF 43.06 95.14
EV to Market Cap EV to Market Cap 1.21 1.18
EV to Revenue EV/Rev 2.93 3.32
Price to Book Value [P/B] P/B 7.67 10.12
Price to Earnings [P/E] P/E 60.89 87.94
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 2.58
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 28.61
Dividend per Basic Share Div per Share (Qtr) 0.00 0.25
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 8.70
Interest Coverage Int. cover (Qtr) 2.62 78.45
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -67.83 -168.16
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -21.70 652.12
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 8.38
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 143.86 -61.29
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 100.44 15.12
EBIT Growth (1y) % EBIT 1y % (Qtr) 139.96 60.08
EBT Growth (1y) % EBT 1y % (Qtr) 114.28 12.78
EPS Growth (1y) % EPS 1y % (Qtr) 103.67 30.76
FCF Growth (1y) % FCF 1y % (Qtr) 81.24 -16.37
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 71.07 31.09
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.91 1.15
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.05
Cash Ratio Cash Ratio (Qtr) 0.21 0.39
Current Ratio Curr Ratio (Qtr) 1.59 1.55
Debt to Equity Ratio Debt/Equity (Qtr) 1.90 0.90
Interest Cover Ratio Int Coverage (Qtr) 2.62 78.45
Times Interest Earned Times Interest Earned (Qtr) 2.62 78.45
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 13.80 0.42
EBIT Margin % EBIT Margin % (Qtr) 8.52 -3.70
EBT Margin % EBT Margin % (Qtr) 5.27 -6.01
Gross Margin % Gross Margin % (Qtr) 15.80 20.28
Net Profit Margin % Net Margin % (Qtr) 4.00 -7.25