Construction Partners currently trades at $112.17 per share and has shown little upside over the past six months, posting a middling return of 1.8%. The stock also fell short of the S&P 500’s 12.9% gain during that period.

Does this present a buying opportunity for ROAD? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free for active Edge members.

Why Are We Positive On Construction Partners?

Founded in 2001, Construction Partners (NASDAQ: ROAD) is a civil infrastructure company that builds and maintains roads, highways, and other infrastructure projects.

1. Projected Revenue Growth Is Remarkable

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.

Over the next 12 months, sell-side analysts expect Construction Partners’s revenue to rise by 22.3%. While this projection is below its 34.1% annualized growth rate for the past two years, it is eye-popping and implies the market sees success for its products and services.

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 an astounding 23% compounded annual growth rate over the last five years. This performance was better than most industrials businesses.

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 6.5 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 6.1%.

Final Judgment

These are just a few reasons why Construction Partners is a cream-of-the-crop industrials company. With its shares trailing the market in recent months, the stock trades at 39.6× forward P/E (or $112.17 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.

Stocks We Like Even More Than Construction Partners

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