• If you are wondering whether Construction Partners stock still offers value after a strong run, this article walks through what the market might be pricing in and what that could mean for you.
• The shares recently closed at US$114.20, with returns of 1.3% over the last week, 1.8% over the last month, 1.8% year to date, 43.1% over the past year, and a very large gain over three years compared to five years that sit around 3x.
• Recent attention on the company has focused on its role in U.S. road and infrastructure projects and how that exposure might shape expectations for future contracts and cash flows. This context has helped frame the debate around whether the current share price fairly reflects those prospects or builds in a premium.
• Despite that backdrop, Construction Partners currently records a valuation score of 0 out of 6. Next, we will look at how traditional valuation approaches assess the stock and then finish with a way of thinking about value that goes beyond the standard checks.

Construction Partners scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Construction Partners Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a company might be worth today by taking projected future cash flows and discounting them back to the present using a required rate of return.

For Construction Partners, the model used is a 2 Stage Free Cash Flow to Equity approach that starts from last twelve months free cash flow of about $144.48 million. Analysts provide explicit forecasts out to 2027, with free cash flow for that year estimated at $266.91 million. Beyond that, Simply Wall St extrapolates a path of cash flows through 2035, with projected free cash flow for each year between 2026 and 2035 remaining in the hundreds of millions of dollars.

When those projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $86.45 per share. Compared with the recent share price of $114.20, this implies the stock is about 32.1% above the DCF estimate, which points to Construction Partners trading at a premium to this particular cash flow based valuation.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Construction Partners may be overvalued by 32.1%. Discover 873 undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Construction Partners Price vs Earnings

For a profitable company, the P/E ratio is a straightforward way to think about how much you are paying for each dollar of earnings, which makes it a useful cross check on the DCF outcome.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or perceived resilience can support a higher P/E, while more uncertainty or weaker earnings quality usually calls for a lower one.

Construction Partners currently trades on a P/E of 63.40x. That sits above the Construction industry average of about 35.80x and the peer average of 34.75x. Simply Wall St also calculates a proprietary “Fair Ratio” for the stock of 31.99x. This is the P/E level it might typically trade on given its earnings growth profile, industry, profit margins, market cap and risk factors.

This Fair Ratio can be more informative than a simple industry or peer comparison because it adjusts for company specific drivers like growth, risks and profitability rather than assuming one size fits all. Compared with the current P/E of 63.40x, the Fair Ratio of 31.99x suggests the shares are pricing in a richer multiple than this framework supports.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Construction Partners Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which Simply Wall St hosts on the Community page used by millions of investors.

A Narrative is your story about a company, where you spell out what you think is realistic for its future revenue, earnings and margins, and then link that view to a financial forecast and a fair value per share.

Rather than just looking at a single P/E or DCF output, Narratives let you compare your own fair value to the current share price so you can decide if the gap between the two is big enough for you to consider buying or selling. They also automatically refresh when new information such as earnings or news is added to the platform.

For Construction Partners, one investor Narrative might assume very strong revenue growth and robust margins that support a higher fair value than today’s price. Another Narrative could be more cautious on future contracts and cash flows and arrive at a fair value that sits well below the current market price.

Do you think there's more to the story for Construction Partners? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.