Good growth and still cheap

Acrow was listed in April 2018.
Since then, it share price has increased from around 25 c to 1.18 $ today.
It looks logical given the trajectory of their earnings.
CAGR since FY 18 :
. + 21 % for revenues (not fully organic as they did several acquisitions)
. + 32 % for EBITDA (EBITDA margin went from 5 % in FY 18 to 34.8 % in H1 24, as their business mix changed),
. + 58 % for EPS (EPS 23 : 11.7 c),
. + 54 % for dividend.

The past growth of the company is not reflected in its valuation with a PE 24 of around 10 x and a free cash flow yield* of 6 %+ (if we just look at the maintenance Capex when looking at their free cash flow).
However, the low PE is a bit misleading, as a significant part of past NPAT comes from gain on disposal of assets**
These gains are not included in the cash flow from operation, probably a better reflection of the underlying business.

For now, there is no sign of slowdown as H1 24 remained strong and the company just reiterated its guidance for FY 24 which include another strong FY 24.
Also interesting to note that a director just bought 80,000 shares at 1.1330 $ on 16/4/24.

So I guess their valuation is probably justified by cautious expectations for their future growth as their businesses (formwork and scaffolding hire) may be seen as quite cyclical.
My understanding is that they mainly depend on large infrastructure projects which are expected to remain significant for some time.
ACF has also addressed the cyclicity of their business by developing into industrial services (23 % of FY 23 revenues) that they consider more annuity style business, even if it is a lower margin business.

Quite interesting also to remind their EBITDA margin of 34.8 %.
That's a high level for a construction related company, mainly due to their formwork business (60 % of FY 23 revenues).
The large margin increase since their listing (5 % in FY 18) is due, in particular, to the fact that the company is now developing its own products, while they were initially buying from other manufacturers.
As the gain on disposal of assets are included in the "other revenues", it also means that these high EBITDA margin benefit from the impact of asset disposals.

* free cash flow yield more around 7.7 % when we include the last 2 acquisitions on a full year basis
** interesting discussion about this in another thread "Acrow reports another period of record financial results" between ajkin8 and MackGor.