Shares in Acrow Ltd (ASX: ACF) have been sold off over the past few weeks in particular and are now trading marginally above their 12-month lows.
The team at Shaw and Partners believes that this creates a buying opportunity for investors in the All Ords company, and they've issued a bullish price target on the stock, which we'll get to later.
'Firstly, why does Shaw like the look of this company?
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Recent headwinds no big deal
The Shaw team said in a research note to clients that current headwinds, in the form of negative free cash flow and an increase in net debt, can be explained by project delays in Queensland and by investments for growth.
But they say a turnaround for Acrow could be rapid.
As they said:
Our forecasts assume a return to normal conditions in infrastructure spending across Australia and suggest that Acrow can generate positive free cash flow as early as 2H26. Potentially above-average margins from Olympics work represent upside to our forecasts.
Citi said the company had been investing via expenditure on equipment for leasing, working capital, and acquisitions, with Acrow buying four companies recently for a combined $75.4 million.
The Citi team said Acrow also remained exposed to strong-growth markets.
They said further:
These include the Industrial Access division's significant growth opportunities in the defence and asset maintenance sectors, and the Brisbane 2032 Olympic and Paralympic Games. Regarding the Games, staged construction on venues is expected to commence in the March Qtr 2027 with peak activity across multiple venues expected between 2027 and 2031. We expect contract awards to be announced from July 2026. The 2032 hard-close date may also provide various Engineering & Construction companies the ability to surge-price for several years.
Shares looking cheap
Citi said that despite the near-term growth drivers, Acrow was trading at a discount to its peers.
Citi has a price target of $1.25 per share for Acrow, compared to its current share price of 85.5 cents, which would represent a 46.2% return.
The company also pays a trailing dividend yield of 5.78%.
Acrow in February reported record sales revenue of $155.9 million for the first half, up 23% on the previous corresponding period, while underlying net profit was 22% lower at $12.9 million.
The company's accelerated capital expenditure during the half saw net debt increase by $28.2 million to $151.5 million, which was above the company's target range.
Acrow was valued at $266.4 million at the close of trade on Friday.
