ACA

We rate Arcosa, Inc. (ACA) as a Hold with a composite score of 51.4/100 at a current price of $124.95. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (73th percentile) and momentum (65th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (21th percentile) and quality (29th percentile) tempers our overall conviction. We assign a No Moat rating (37/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Arcosa, Inc. holds a top-quartile position (#0 of 50) within the Construction sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 51.4/100 places it at rank #1788 in our full 7,333-stock universe. At $4.6B in market capitalization, Arcosa, Inc. is a mid-cap player in the Construction space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 20% and momentum in the 65th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 21th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 22% (-1.8pp vs sector) narrow to operating margins of 10% (+2.9pp vs sector) and net margins of 5.9%, yielding a gross-to-net conversion rate of 27%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $124.95, Arcosa, Inc. is trading near fair value based on current fundamentals. Our value factor score of 54/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 35.8x (a 87% premium to the sector median of 19.1x), EV/EBITDA of 20.9x (at a premium), P/B of 2.4x, P/S of 2.2x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to Arcosa, Inc.. The stock presents a balanced risk profile: weak quality scores (29th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: weak quality scores (29th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 73th percentile and quality factor at the 29th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (73th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Arcosa, Inc.'s capital allocation as Poor. Key concerns include suboptimal returns on capital. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Arcosa, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Arcosa, Inc. receives a Hold rating with a composite score of 51.4/100 (rank #1788 of 7,333). Our quantitative framework assigns a No Moat (37/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 48/100.

Our analysis supports a neutral stance on Arcosa, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.