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ACA vs. ROAD: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in Building Products - Miscellaneous stocks are likely familiar with Arcosa (ACA) and Construction Partners (ROAD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Arcosa is sporting a Zacks Rank of #2 (Buy), while Construction Partners has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ACA likely has seen a stronger improvement to its earnings outlook than ROAD has recently. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

ACA currently has a forward P/E ratio of 14.27, while ROAD has a forward P/E of 19.95. We also note that ACA has a PEG ratio of 2.26. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ROAD currently has a PEG ratio of 3.34.

Another notable valuation metric for ACA is its P/B ratio of 1.02. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ROAD has a P/B of 2.52.

These metrics, and several others, help ACA earn a Value grade of B, while ROAD has been given a Value grade of D.

ACA stands above ROAD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ACA is the superior value option right now.


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Zacks Investment Research