Is It Too Late To Consider Construction Partners (ROAD) After A 73% One Year Surge
- If you are wondering whether Construction Partners is still reasonably priced after its recent run, this article walks through what the current share price might be implying about value.
- The stock last closed at US$133.93, with returns of 5.4% over 7 days, 17.8% over 30 days, 19.4% year to date and 72.6% over 1 year. The 3 year return is very large and the 5 year return is also very large.
- Recent attention around Construction Partners has focused on its role as a road construction and infrastructure contractor in the US. Investors are watching how its project pipeline and contract wins line up with broader public spending on transport. This backdrop is important context for understanding why the market has been reassessing the stock.
- Despite this backdrop, our current valuation checks give Construction Partners a score of 0 out of 6. We will look at what different valuation approaches say about the stock today and then finish with a framework that can help you think about value in an even more complete way.
Construction Partners scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Construction Partners Discounted Cash Flow (DCF) Analysis
A DCF model takes estimates of the cash a business could generate in the future and discounts those amounts back to today, to arrive at an implied value per share.
For Construction Partners, the latest reported free cash flow is about $182.9 million. Using a 2 Stage Free Cash Flow to Equity model built on cash flow projections, analysts provide explicit estimates up to 2027, with Simply Wall St extrapolating out to 2035. In this setup, projected free cash flow reaches about $442.3 million in 2035, with each year’s figure discounted back to today in dollar terms.
Adding those discounted cash flows together leads to an estimated intrinsic value of roughly $96.82 per share. Compared with a recent share price of US$133.93, the DCF suggests the stock is about 38.3% overvalued on these assumptions. That does not mean the price must fall, but it does suggest expectations built into the current price are quite full.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Construction Partners may be overvalued by 38.3%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Construction Partners Price vs Earnings
For profitable companies, the P/E ratio is a useful way to think about value because it links what you pay for each share to the earnings that business is currently generating. Investors usually accept a higher P/E if they expect stronger growth or see the earnings as relatively reliable, and they look for a lower P/E if growth is more modest or risks feel higher.
Construction Partners is trading on a P/E of 62.0x. That sits above both the Construction industry average P/E of about 38.3x and the peer group average of 28.1x. This tells you the market is currently putting a richer price on each dollar of its earnings than on many comparable companies.
Simply Wall St also calculates a Fair Ratio of 38.8x, which is the P/E level they would expect for Construction Partners after factoring in elements like its earnings growth profile, industry, profit margins, market cap and risk characteristics. This Fair Ratio aims to be more tailored than a simple comparison with peers or the broad industry, because it adjusts for the company’s specific strengths and risk factors. On this Fair Ratio basis, the current 62.0x P/E looks quite full, which points to the shares screening as overvalued on this metric.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Construction Partners Narrative
Earlier we mentioned that there is an even better way to think about valuation, so on Simply Wall St you can use Narratives on the Community page to connect your story about Construction Partners with the numbers by setting your own revenue, earnings and margin assumptions, translating those into a fair value, comparing that fair value with the current price to help you assess the stock, and then seeing that view update automatically when new news or earnings arrive. This is why different investors on the platform can reasonably land on very different fair values for the same stock, such as the recent spread in user Narratives for Construction Partners that sits well below and above the current analyst consensus fair value of about US$127.43.
Do you think there's more to the story for Construction Partners? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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