Suntx Capital Partners, a Dallas-based investment firm, recently reduced its stake in Construction Partners Inc. (ROAD), a leading infrastructure and road construction company. This significant transaction decreased SunTx Capital Partners’ holdings in ROAD by 91.13%, prompting analysis of the move and its potential implications.
SunTx Capital Partners Divests from Construction Partners Inc.
On September 19, 2023, SunTx Capital Partners executed a transaction, selling off a substantial portion of its shares in Construction Partners Inc. The firm divested 7,955,994 shares, retaining 774,139 shares. The shares were traded at $35.2 each. Despite the magnitude of the sale, the impact on SunTx Capital Partners’ overall portfolio was minimal.
About SunTx Capital Partners
SunTx Capital Partners, headquartered in Dallas, Texas, employs a focused investment strategy. Currently, Construction Partners Inc. represents the sole holding in its portfolio, valued at $21 million. This concentrated approach underscores the significance of the recent divestment.
Construction Partners Inc.: An Overview
Construction Partners Inc. (ROAD), listed on the NASDAQ, specializes in infrastructure and road construction projects. The company, which went public in 2018, caters to both public and private sector clients. Its services encompass the construction of highways, roads, bridges, airports, and commercial and residential sites, as well as the supply of hot mix asphalt. ROAD boasts a market capitalization of $1.83 billion, with its stock currently trading around $34.8.
Analyzing Construction Partners Inc.’s Financial Performance
Construction Partners Inc. exhibits a Price-to-Earnings (PE) ratio of 59.00, indicating profitability. According to GuruFocus, ROAD is modestly undervalued with a GF Value of $39.43 and a Price to GF Value ratio of 0.88. The company holds a Financial Strength rank of 6/10, a Profitability Rank of 7/10, and a Growth Rank of 8/10, showcasing its robust financial standing and growth potential.
Evaluating ROAD’s Stock Performance
Since the transaction, ROAD’s stock price has experienced a slight decline of 1.14%. However, long-term performance remains strong, with a 167.69% increase since its IPO and a year-to-date gain of 33.33%. A GF Score of 86/100 suggests good outperformance potential, further supported by a Momentum Rank of 9/10.
Examining Construction Partners Inc.’s Financial Health
Key financial metrics for Construction Partners Inc. include a cash-to-debt ratio of 0.13 and an interest coverage of 2.94. The company’s Return on Equity (ROE) stands at 6.85, and its Return on Assets (ROA) is 2.80. While the company demonstrates strong financial health overall, its gross margin growth (-6.40%) and operating margin growth (-20.30%) have trended downwards. Conversely, its 3-year revenue growth (18.00%) and EBITDA growth (4.30%) indicate positive long-term trends.
Conclusion
SunTx Capital Partners’ significant reduction in its Construction Partners Inc. holdings raises questions about the firm’s investment strategy. While Construction Partners Inc. remains a financially sound company with growth potential, the declining operating and gross margin growth warrants attention. Investors should conduct thorough research and consider these factors before making investment decisions.
