Construction Partners, Inc. (NASDAQ: ROAD)

Sector: Industrials Industry: Engineering & Construction CIK: 0001718227
Market Cap 6.33 Bn
P/B 6.94
P/E 62.18
P/S 2.25
ROIC (Qtr) 6.85
Div Yield % 0.00
Rev 1y % (Qtr) 67.21
Total Debt (Qtr) 1.69 Bn
Debt/Equity (Qtr) 1.85

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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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 159.01M provide 2.72x coverage of short-term debt 58.37M, demonstrating strong liquidity position and minimal refinancing risk.
  • Tangible assets of 2.22B provide exceptional 17.14x coverage of deferred revenue 129.30M, showing strong service capability backing.
  • Robust tangible asset base of 2.22B provides 6.28x coverage of working capital 352.78M, indicating strong operational backing.
  • Tangible assets of 2.22B provide robust 9.26x coverage of other current liabilities 239.46M, indicating strong asset backing.
  • Operating cash flow of 291.30M provides strong 19.43x coverage of operating expenses 14.99M, showing operational efficiency.

Bear case

  • Operating cash flow of 291.30M barely covers its investment activities of (1.28B), with a coverage ratio of -0.23, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Cash reserves of 159.01M provide limited coverage of acquisition spending of (1.16B), which is -0.14x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 595.22M relative to inventory of 155.13M (3.84 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating earnings of 224.88M show weak coverage of depreciation charges of 148.27M, with a 1.52 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 148.27M relative to operating cash flow of 291.30M, which is 0.51x 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. 62.71 Bn 61.60 2.31 6.02 Bn
2 FER Ferrovial SE 48.08 Bn 14.25 5.05 -
3 FIX Comfort Systems Usa Inc 35.76 Bn 42.69 4.30 0.39 Bn
4 EME EMCOR Group, Inc. 29.29 Bn 25.91 1.80 0.42 Bn
5 APG APi Group Corp 17.37 Bn 111.36 2.27 3.05 Bn
6 MTZ Mastec Inc 17.01 Bn 51.39 1.24 2.77 Bn
7 J Jacobs Solutions Inc. 16.94 Bn 58.56 1.41 2.71 Bn
8 BLD TopBuild Corp 13.35 Bn 23.52 2.55 3.09 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.38 1.61
EV to Cash from Ops. EV/CFO 26.48 6.94
EV to Debt EV to Debt 4.57 11.81
EV to EBIT EV/EBIT 34.30 17.80
EV to EBITDA EV/EBITDA 20.68 13.77
EV to Free Cash Flow [EV/FCF] EV/FCF 45.08 55.77
EV to Market Cap EV to Market Cap 1.22 1.20
EV to Revenue EV/Rev 2.74 1.65
Price to Book Value [P/B] P/B 6.94 5.81
Price to Earnings [P/E] P/E 62.18 35.89
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 2.51
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 25.81
Dividend per Basic Share Div per Share (Qtr) 0.00 0.24
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 4.05
Interest Coverage Int. cover (Qtr) 2.49 80.15
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -62.66 -166.01
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 107.36 637.72
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 5.87
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 104.48 92.47
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 82.74 8.04
EBIT Growth (1y) % EBIT 1y % (Qtr) 102.29 85.34
EBT Growth (1y) % EBT 1y % (Qtr) 46.07 42.07
EPS Growth (1y) % EPS 1y % (Qtr) 39.10 43.76
FCF Growth (1y) % FCF 1y % (Qtr) 26.58 -20.95
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 70.02 32.46
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.87 1.14
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.05
Cash Ratio Cash Ratio (Qtr) 0.27 0.38
Current Ratio Curr Ratio (Qtr) 1.61 1.55
Debt to Equity Ratio Debt/Equity (Qtr) 1.85 0.89
Interest Cover Ratio Int Coverage (Qtr) 2.49 80.15
Times Interest Earned Times Interest Earned (Qtr) 2.49 80.15
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 13.30 0.40
EBIT Margin % EBIT Margin % (Qtr) 8.00 -2.31
EBT Margin % EBT Margin % (Qtr) 4.78 -4.59
Gross Margin % Gross Margin % (Qtr) 15.60 20.38
Net Profit Margin % Net Margin % (Qtr) 3.60 -5.96