Vulcan Materials Co (VMC, Financial) recently experienced a daily loss of -2.28%, yet it has gained 11.76% over the past three months. With an Earnings Per Share (EPS) of 6.85, investors might wonder if the stock is modestly overvalued. This analysis delves into Vulcan Materials Co's valuation to determine if its current market price justifies its financial metrics and future growth potential.
Company Overview
Vulcan Materials Co, the largest producer of construction aggregates in the United States, operates extensively across several key states. In 2023, the company sold millions of tons of aggregates, asphalt mix, and ready-mix. With a market cap of $35 billion and sales reaching $7.70 billion, understanding its valuation is crucial for investors. The GF Value estimates Vulcan Materials Co's fair value at $225.78 per share, while its current stock price stands at $264.34, suggesting a modest overvaluation.
Understanding GF Value
The GF Value is a proprietary measure calculated from historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. For Vulcan Materials Co, the GF Value suggests the stock might be overvalued, which could lead to lower future returns compared to its business growth. This valuation tool is crucial for investors aiming to buy stocks at prices close to or below their intrinsic value.
Financial Strength and Risk Assessment
Investing in financially robust companies is less risky, especially in terms of capital loss. Vulcan Materials Co's financial strength is fair, with a financial strength rank of 7 out of 10. However, its cash-to-debt ratio of 0.08 is lower than many peers, indicating a higher debt level relative to cash on hand.
Profitability and Growth Metrics
Vulcan Materials Co has maintained strong profitability, with an operating margin of 17.79%, ranking higher than most competitors. The company's growth has also been impressive, with significant revenue and EBITDA increases over the past years, reflecting its capacity to expand profitably.
Capital Efficiency: ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) provides insight into financial efficiency. Vulcan Materials Co's ROIC of 7.57 is currently below its WACC of 10.58, suggesting that the company is not generating adequate returns on its investments relative to its capital costs.
Conclusion
While Vulcan Materials Co (VMC, Financial) demonstrates strong profitability and growth, its current stock price suggests a modest overvaluation relative to its intrinsic value calculated by GF Value. Investors should weigh these factors carefully when considering Vulcan Materials Co as a potential investment.
To explore more about Vulcan Materials Co and other high-quality investment opportunities, visit the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
