Increasing Infrastructure Investments And Minerals Demand Will Fuel Future Progress

Key Takeaways

• Infrastructure investment and mining sector trends are expanding NACG's addressable market, supporting diversification and steady revenue growth through long-term contracts and renewals.
  
• Strategic contract wins, operational improvements, and leadership investments drive margin recovery, stable cash flow, and strong positioning for future large-scale project opportunities.
  
• High reliance on key projects, labor shortages, heavy capital needs, and resource sector exposure create substantial volatility, margin pressure, and long-term growth uncertainty.

Catalysts

Provides mining and heavy civil construction services to customers in the resource development and industrial construction sectors in Australia, Canada, and the United States.

• Increasing North American government and private investment in large-scale infrastructure-especially climate resiliency, mine access, and energy transition projects-is expanding NACG's addressable market, supporting diversification and setting the stage for substantial organic revenue growth as new awards begin ramping up in 2026–2028 (impacts revenue and future backlog).
  
• Sustained global demand for metals and critical minerals, heightened by resource nationalism and electrification trends, continues to drive mining investment in Canada and Australia; this underpins steady growth in long-duration mine service contracts and recurring maintenance revenue, supporting top-line expansion and improved revenue visibility.
  
• The company's recent record contract win in Australia, along with a 100% contract renewal rate, demonstrates growing market share in a key growth region and sets a strong baseline for high equipment utilization, which supports EBITDA margin recovery in H2 2025 and beyond (impacts earnings and margin normalization).
  
• Expansion of NACG's recurring maintenance and joint venture contract portfolio, combined with strategic fleet modernization, enables higher-margin, lower-volatility work and improved operational efficiency, supporting stable free cash flow generation and higher return on capital from 2026 onwards (impacts cash flow and net margins).
  
• Investment in leadership and operational expertise, particularly in building out infrastructure-focused teams, positions NACG to capture significant share of upcoming infrastructure spend; early positioning in project teams for major bids increases the likelihood of winning transformative projects, accelerating long-term revenue and EBITDA growth.

North American Construction Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming North American Construction Group's revenue will grow by 4.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.8% today to 7.8% in 3 years time.
• Analysts expect earnings to reach CA$111.1 million (and earnings per share of CA$2.6) by about September 2028, up from CA$34.5 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.0x on those 2028 earnings, down from 15.7x today. This future PE is about the same as the current PE for the CA Energy Services industry at 10.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.48%, as per the Simply Wall St company report.

North American Construction Group Future Earnings Per Share Growth

Risks

• High customer and project concentration-roughly 50% of contract backlog coming from a single Australian site-creates significant revenue volatility risk if contracts are lost, delayed, or not renewed, directly impacting overall revenue stability and long-term earnings visibility.
  
• Persistent skilled labor shortages in both Australia and Canada, especially for heavy equipment technicians, can lead to recurring reliance on costly subcontractors during periods of rapid growth or expansion into new regions, increasing operating expenses and pressuring net margins.
  
• Heavy capital intensity, with a large depreciating fleet and high sustaining capital spend ($180–$200 million/year), means low equipment utilization or project disruptions (such as sudden oil sands shutdowns or lower-than-expected mining activity) can quickly erode free cash flow and net margins.
  
• Exposure to oil sands and resource industries ties NACG's fortunes to commodity price cycles and energy transition policies; a rapid global shift toward renewable energy or a slowdown in oil sands investment could shrink the addressable market, dampening long-term revenue growth and asset utilization.
  
• Increasing regulatory, environmental, or ESG pressures could result in delayed or cancelled projects, higher compliance costs, and rising financing expenses, collectively depressing net earnings and lowering potential share valuations over the long run.

Valuation

• The analysts have a consensus price target of CA$24.25 for North American Construction Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$28.0, and the most bearish reporting a price target of just CA$19.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$1.4 billion, earnings will come to CA$111.1 million, and it would be trading on a PE ratio of 10.0x, assuming you use a discount rate of 9.5%.
• Given the current share price of CA$18.45, the analyst price target of CA$24.25 is 23.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.