Monday, DA Davidson increased the price target for Construction Partners Inc (NASDAQ:ROAD) to $50.00 from the previous $45.00, while keeping a Neutral rating on the stock. The firm highlighted that the company's fiscal second-quarter results met expectations during a typically slow season.
The firm's decision was influenced by the company's solid backlog and bookings, which provide clear visibility into the second half of the fiscal year and have led to an upward revision in both guidance and DA Davidson's own estimates.
Construction Partners, known for its infrastructure and road construction services, has demonstrated a steady performance that aligns with industry multiples.
DA Davidson's new price target is based on a multiple of 15 times the estimated earnings before interest, taxes, depreciation, and amortization (EBITDA) for fiscal year 2024 and 12 times for fiscal year 2025. These multiples are considered healthy by the firm and reflect the company's financial prospects.
The analyst's comments underscore the company's solid financial position and future potential. "F2Q results were largely as expected in a seasonally slow period, although backlog/bookings lend solid visibility into F2H supporting an increase in guidance and our estimates. Our PT is now $50 with what we view as healthy multiples of 15x/12x F24/F25 EBITDA estimates," said the DA Davidson representative.
Despite the price target increase, DA Davidson maintains a Neutral stance on Construction Partners' shares. The firm noted that the stock is trading modestly above the newly set target levels, suggesting that the current market price reflects the updated financial outlook to some extent.
InvestingPro Insights
Following DA Davidson's revised price target for Construction Partners Inc (NASDAQ:ROAD), real-time data from InvestingPro offers additional context for investors. The company is currently trading at a high P/E ratio of 47.29, which is above the industry average, suggesting that investors have high expectations for future earnings growth. Notably, the PEG ratio for the last twelve months as of Q2 2024 stands at 0.27, indicating that the stock may be undervalued relative to its earnings growth potential.
InvestingPro Tips highlight that Construction Partners has delivered a strong return over the last year, with a 93.51% increase in price total return, which could be a signal of market confidence in the company's growth trajectory. Additionally, with a solid revenue growth of 15.62% in the last twelve months as of Q2 2024, the company is demonstrating its ability to expand effectively in the competitive construction sector.
Investors interested in a deeper analysis can find more InvestingPro Tips on Construction Partners, with a total of 15 tips available, offering a comprehensive view of the company's financial health and market position. For those looking to make the most informed investment decisions, a yearly or biyearly Pro and Pro+ subscription is available with an additional 10% off using the coupon code PRONEWS24.
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