Civil infrastructure company Construction Partners, Inc. (ROAD) has acquired certain assets of GAC Contractors, Inc. These include, asphalt, grading and site work operational assets, as well as GAC’s hot-mix asphalt plant located in Panama City, Florida.
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Vertically integrated Construction Partners is an expert in constructing and maintaining roadways in five southeastern states. It operates 57 hot-mix asphalt plants, 14 aggregate facilities, and a liquid asphalt terminal.
Management Weighs In
The President and CEO of Construction Partners, Fred J. Smith, III, commented, “Today’s transaction represents our third acquisition in the Florida panhandle in the past two years, reflecting our commitment to this dynamic and growing area of the Southeast. The addition of GAC’s assets and crews meaningfully enhances our operational resources and capabilities in an existing growth market. At a time when attracting and retaining talent is paramount, we are pleased to welcome more than 200 former GAC employees to our team.”
Notably, this transaction bolsters Construction Partners’ asphalt and site work business in the Florida panhandle.
Analysts’ Take
Recently, Stifel Nicolaus analyst Stanley Elliott reiterated a Buy rating on the stock alongside a price target of $37.
Overall, the Street has a Strong Buy Consensus rating on Construction Partners based on 4 unanimous Buys. The average Construction Partners price target of $33 implies a potential upside of 29.1% for the stock.
Valuation Speaks
Let us consider some of the key metrics for Construction Partners and how it fares against the broader industry.
ROAD has an earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 8.8%, which is lower than the industry median of 13.3%, indicating the company has legroom to optimize its costs.
Notably, the company generates $22,000 in net income per employee, whereas the median industry figure is $20,500, indicating that Construction Partners is superior in utilizing its workforce.
Further, the forward non-GAAP P/E multiple for Construction Partners is at 35, while the median figure for the industry is 18.2, indicating that the company’s current share price level is on the expensive side versus its industry peers. That’s after a 14.8% slide in share prices so far this year.
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