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Construction Partners, Inc. (NASDAQ:ROAD), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$28.04 and falling to the lows of US$19.87. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Construction Partners' current trading price of US$21.06 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Construction Partners’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Construction Partners worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.8% below my intrinsic value, which means if you buy Construction Partners today, you’d be paying a fair price for it. And if you believe the company’s true value is $22.36, then there’s not much of an upside to gain from mispricing. Furthermore, Construction Partners’s low beta implies that the stock is less volatile than the wider market.
What does the future of Construction Partners look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Construction Partners' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ROAD’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on ROAD, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 3 warning signs for Construction Partners (1 doesn't sit too well with us) you should be familiar with.
If you are no longer interested in Construction Partners, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.