I Just Bought $17,000 More of This Stock
Summary
Daniel provides a comprehensive analysis of Construction Partners (ROAD) following its Q3 2026 earnings release. Daniel highlights several key financial metrics, including a 28% year-over-year revenue increase, a 34% rise in net income, and a record backlog of $3.36 billion. Daniel notes that management has raised its fiscal year guidance for the third time, reflecting strong execution and momentum in the Sunbelt region. Daniel also discusses the acquisition of Ellsworth Construction, which expands the company's footprint in North Texas and increases exposure to the growing data center construction market.
Daniel addresses the company's valuation and debt levels, noting that while the debt-to-EBITDA ratio is currently elevated at 3.17x due to a recent transformational acquisition, management is committed to reducing it to 2.5x. Daniel calculates the owner's free cash flow for 2026 at approximately $332 million and argues that the stock is trading at an attractive 11.9x forward EBITDA multiple, which is significantly lower than its historical median of 16.5x. Daniel presents three potential scenarios for 2030, suggesting that the stock could deliver annual returns between 12% and 23%.
Mentioned Stocks
Reasoning: Daniel explicitly states that Daniel purchased even more shares of ROAD on the day of the earnings report, making it nearly 5% of Daniel's overall portfolio. Daniel cites the 28% revenue growth, raised guidance, and a record backlog as evidence of strong fundamentals. Daniel argues the stock is cheap at 11.9x forward EBITDA compared to a historical median of 16.5x. Daniel sets a future price target for 2030 between $287 and $340 per share, depending on margin expansion and potential future acquisitions.