Arcosa (ACA): Earnings Growth of 15.8% Reinforces High-Value Narrative Despite Expensive Shares

Arcosa (ACA) posted earnings growth of 15.8% over the past year, keeping its net profit margin steady at 5.2%. Looking forward, analysts expect the company’s earnings to grow at a robust 22.4% annually for the next three years, while revenue is projected to rise at a more modest pace of 5.3% per year. As the stock trades at $102, just below the industry average Price-To-Earnings ratio but well above some fair value estimates, investors will be watching how future profit growth balances the premium valuation.

See our full analysis for Arcosa.

Next up, we’re putting these numbers in context by comparing them with the prevailing narratives in the market and the Simply Wall St community. Let’s see which stories hold up, and where fresh perspectives might emerge.

See what the community is saying about Arcosa

Margins Expand as Pricing Power Builds

• Analysts project Arcosa’s net profit margin to climb from 3.4% today to 9.9% within three years, a sizable increase that would more than double profitability relative to sales.
• According to the analysts' consensus view, expanding margins, stronger pricing, and a disciplined focus on value-added, sustainable offerings are positioning Arcosa for higher earnings resilience and scalability.
  • Consensus narrative notes that a record-high segment backlog, driven by big public infrastructure projects and rising utility grid demand, is fueling this outlook for ongoing profit margin growth.
  • Sustained pricing increases in aggregates and recent acquisitions, such as Stavola, are specifically cited in the consensus as enhancing both near-term profit per ton and supporting the long-term case for margin expansion.

Consensus followers are watching if Arcosa’s margin growth can outpace both its peers and cost pressures. Analyst views unpack this further in their deep-dive.

📊 Read the full Arcosa Consensus Narrative.

Heavy Reliance on Infrastructure Spending

• Arcosa’s business is structurally linked to government-backed infrastructure and public-sector projects, exposing its revenue and backlog to volatility from political spending cycles and delayed appropriations.
• The consensus narrative underscores that this reliance is both a strength, providing multi-year visibility, and a vulnerability, as any major shift in federal or state budgets could disrupt growth.
  • Analysts flag that the company’s strong pipeline of public works and record backlog are supportive now, but warn future revenue predictability hinges directly on continued infrastructure investment at scale.
  • Critically, any political decisions that slow or cut funding could introduce significant risk to Arcosa’s long-term earnings forecast and cash flow, as discussed in detail by consensus analysts.

Valuation: Price Premium Versus DCF Fair Value

• Shares trade at $102, putting Arcosa’s Price-To-Earnings ratio at 33.7x. This is slightly below the US construction industry’s 34.8x average, yet vastly above its DCF fair value of $40.32 and higher than peer group averages.
• The consensus narrative acknowledges that current valuation embeds high growth and margin expansion assumptions, with the analyst price target at $116, or about 14% above today’s price. This gap shows investors are paying up for future growth, but also taking on risk if projected earnings do not materialize.
  • Consensus analysts highlight that for the $116 target to make sense, Arcosa must deliver $3.3 billion in revenue and $330 million in annual earnings by 2028, with the PE multiple compressing below today’s industry average.
  • At current levels, the stock’s premium partly reflects sector momentum and a quality premium, but the significant spread above DCF fair value could cause skepticism if growth expectations disappoint.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Arcosa on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Arcosa research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

See What Else Is Out There

Arcosa’s shares command a hefty premium above fair value. If profit growth misses expectations, investors could face significant downside risk.

To avoid paying over the odds, consider these 832 undervalued stocks based on cash flows that offer stronger valuation safety nets and better pricing discipline for your next investment.

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.