Cardinal Infrastructure Group Inc. (CDNL) stock intrinsic value fair value estimate & owner earnings analysis

Cardinal Infrastructure Group, founded in 2013 in Raleigh, North Carolina, prepares raw land for building. Its crews clear and grade sites, lay water, sewer and stormwater pipe, drill and blast rock, and pave, mainly for homebuilders, land developers, and commercial, industrial and data-center projects in the Carolinas and Georgia. It went public in December 2025. Owners hold their stake partly as shares and partly as operating-company units exchangeable for shares; we value both together, about 48.3 million shares now that the Allied Paving deal has closed. Earnings record. Only three audited years exist. We measure owner earnings as cash from operations, excluding swings in working capital, minus stock compensation, minus the equipment spending needed to keep the existing business running. On that basis owner earnings were $24.9M in 2023, $30.9M in 2024 and $29.7M in 2025; before interest, $28.9M, $35.5M and $36.2M, or 11.7%, 11.3% and 7.9% of revenue. In 2025 revenue grew 45% to $456M while cash from operations fell to $37.9M, mainly because $34M went into unbilled contract work; we removed that timing effect. Of the $43.8M of 2025 equipment purchases, the part matching the company's average 7% capex-to-revenue ratio applied to its revenue growth was treated as expansion, not upkeep. Non-cash amortization of acquired customer and backlog intangibles ($7.1M in 2025, $8.4M in the first half of 2026 alone) is added back, but those intangibles wear off within a few years, so the cases never let acquired earnings grow on their own. What changed. The business is now far larger than its audited history. A.L. Grading of Atlanta was bought in February 2026 for $245.5M ($48.6M cash, $80M of new borrowing and $116.9M of shares), Piedmont Pipe was also bought, and Allied Paving of Atlanta closed on October 1, 2026 for about $120M ($62M cash and about $58M of shares), bringing roughly $100-108M of revenue. In June the company sold 4.6 million shares for $336M. First-half 2026 revenue was $394M, backlog was $866M at June 30, and the company expects $880-900M for 2026 before Allied. Profitability has slipped: second-quarter adjusted gross margin fell from 21.3% to 15.9%, which management attributes to subcontractor and rental costs in newer markets, less residential work and weather. Our own figures confirm it: first-half 2026 owner earnings before interest were about $30M on $394M of revenue, roughly 7.7%, below every prior full year. Since our last review, that first-half margin is the reason we start the cases at a 7.5% margin rather than slightly above 8%, which trims each case by roughly $0.20-$2 a share. In September the company expanded its bank facility to $550M, including a $250M delayed-draw term loan for acquisitions that was undrawn; all borrowings now mature in September 2031. That changes nothing today but shows more acquisitions are planned. We give no credit for deals not yet made. Growth check. In 2025 owner earnings fell 4% (before interest they rose 2%). Year one of the base case is higher per share than 2025 only because of acquisitions already closed and paid for, partly with new shares, which is why the share count rose about 26%. No faster organic growth is assumed; the 64% organic growth of the second quarter is not something we count on. We credit only businesses already owned and backlog already signed. Tax. Before its IPO Cardinal was a pass-through and paid almost no income tax. We apply a 24% combined tax rate to all future earnings so the figures reflect what a fully taxed owner keeps. The company also owes its pre-IPO owners 85% of certain tax savings under a tax receivable agreement; that is a claim on tax benefits we do not credit, so we do not deduct it separately. Base case: about $950M of annual revenue at a 7.5% pre-tax cash margin for two years, in line with the first half of 2026, recovering to 8.5% from year three as the Atlanta businesses, which earned 20-26% adjusted EBITDA margins before purchase, are absorbed. That is still below the 2023-2024 level. In years six and seven a moderate housing slowdown cuts revenue 15% and the margin to 6%. After tax that is about $54-61M a year, or $37M in the slowdown years. After year ten earnings settle 10% lower, because nothing we can name makes a regional site contractor's earnings last forever. Business value is about $919M. Net cash is about $28M: roughly $247M of cash left after the Allied payment and a $30M operating reserve, minus $199.5M of term-loan borrowings, $7.5M of finance leases and $12.3M of contingent acquisition payments. Equity is about $947M, or $19.60 a share. Bear case: two years at today's level, then a repeat of the 2008-2010 collapse in Southeastern residential land development, when housing starts fell by about two-thirds. Revenue falls 40% for three years and the cash margin falls to 1.5%; a partial recovery follows to 80% of today's revenue at an 8% margin, and long-run earning power settles 20% below that. Business value is about $592M; with $28M of net cash, equity is about $620M, or $12.84 a share. In the trough years the business would earn less than its roughly $13M interest bill, but it holds more cash than debt and could pay the bill or retire the loan from cash, so it would not need to sell shares at low prices. About $60M of the loan is swapped to a fixed rate near 3.8% plus the lending spread, so the cost of the debt is close to market and needs no adjustment. Bull case: the Atlanta acquisitions keep their pre-purchase margins. Revenue reaches about $1.05B and the pre-tax cash margin returns to 11%, the 2023-2024 level, from year two, with a milder downturn in year six. Business value is about $1,348M; plus $28M of net cash, equity is $1,376M, or $28.48 a share. Left out of every case: further acquisitions, data-center work beyond the current backlog, and continued organic growth. Each may happen; none is secured. Margin of safety price. We are only moderately confident in the earnings level: three audited years, margins falling just as the business has more than doubled through deals, and no clean record yet of what the acquired companies earn under Cardinal. The worst plausible outcome is a Southeastern housing slump like 2008-2010 arriving while three acquisitions are being integrated, possibly made worse if management spends the new $250M acquisition loan near a peak. The balance sheet as it stands would survive that, since there is net cash, but earnings could sit near zero for several years. The things we are most likely to be wrong about are the normal margin and whether acquired earnings hold: if the margin settles near 7% rather than 8.5%, the shares are worth about $16.50; if acquired customers also drift away, nearer the bear value of about $13. The company pays no dividend and reinvests heavily in acquisitions, so the whole return must come from the business's value being recognized; the price assumes a holding period of three to five years. On that basis our margin of safety price is $11 a share: from $11, the base value reached within about three years implies the 20% target, the 7%-margin value reached within two years implies nearly as much, and the bear case still implies a value above the margin-of-safety price.