On Monday, DA Davidson increased the price target for Construction Partners Inc (NASDAQ:ROAD) to $95.00, up from the previous target of $75.00, while retaining a Neutral rating on the stock. The adjustment comes in light of additional contributions from the Lone Star Paving (LSP) acquisition and a positive outlook on the company's future.
The firm's analyst cited two extra months of financial contributions from LSP and strong visibility as key factors in the decision. The new price target is based on 18 times the fiscal year 2025 and 16 times the fiscal year 2026 EBITDA estimates, which include pro forma costs related to the Lone Star acquisition.
According to the analyst, Construction Partners' stock is currently trading at multiples near the higher end of the range for peers in the infrastructure services sector. This suggests that the stock may be somewhat overrepresented in investor portfolios. Nonetheless, the analyst acknowledged the company's improving margins, driven by the integration of Lone Star, and the healthy growth in bookings and backlog, which support the company's potential for organic growth.
The analyst's outlook remains optimistic about the direction of Construction Partners, anticipating that the company's current trajectory is likely to continue. This sentiment is supported by the company's recent performance and strategic moves, including the Lone Star transaction.
For those interested in a more detailed analysis of the Lone Star transaction and its impact on Construction Partners, DA Davidson's report from October 22 provides additional insights. The report delves into the implications of the acquisition and how it fits into the broader strategy of the company.
In other recent news, Construction Partners, Inc. reported a record fiscal year in 2024, with revenue growing by 17% to $1.82 billion and net income rising by 41% to $68.9 million. The company's adjusted EBITDA also saw a significant increase of 28%, reaching $220.6 million.
The acquisition of Lone Star Paving played a transformative role in the company's strategy, enhancing its presence in Texas and contributing to its EBITDA margins. In addition, Construction Partners completed eight acquisitions in fiscal 2024, further expanding its market share in Sunbelt states.
Looking ahead, the company anticipates robust demand in commercial and public markets, backed by the Infrastructure Investment and Jobs Act. For fiscal 2025, Construction Partners projects increased revenue between $2.48 billion and $2.58 billion, and adjusted EBITDA between $347 million and $377 million.
InvestingPro Insights
Construction Partners Inc (NASDAQ:ROAD) has been experiencing significant momentum in the market, aligning with DA Davidson's optimistic outlook. According to InvestingPro data, the company's stock has shown remarkable performance, with a 131.81% price total return over the past year and a 129.73% return year-to-date. This strong performance is reflected in the stock trading near its 52-week high, at 98.74% of that peak.
The company's financial health appears robust, with revenue growth of 16.65% in the last twelve months and an EBITDA growth of 27.07% over the same period. These figures support the analyst's positive view on the company's growth trajectory and the potential benefits from the Lone Star Paving acquisition.
However, investors should note that ROAD is trading at a high P/E ratio of 75.74, which corroborates the analyst's observation about the stock trading at multiples near the higher end of the range for peers. An InvestingPro Tip suggests that the stock may be in overbought territory, based on its RSI.
For a more comprehensive analysis, InvestingPro offers 21 additional tips for Construction Partners Inc, providing deeper insights into the company's financial position and market performance.
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