Despite a daily loss of 4.41%, Martin Marietta Materials Inc (MLM, Financial) has seen a 3-month gain of 6.39%. The company's Earnings Per Share (EPS) stand at 15.24. But is the stock fairly valued? This article provides a comprehensive valuation analysis of Martin Marietta Materials Inc (MLM). We invite you to read on for a deeper understanding of the company's value.
Martin Marietta Materials is one of America's largest producers of construction aggregates, including crushed stone, sand, and gravel. In 2022, the company sold 207 million tons of aggregates. Its key markets include Texas, Colorado, North Carolina, Georgia, and Florida. Martin Marietta Materials also produces cement in Texas and uses its aggregates in its asphalt and ready-mixed concrete businesses. The company's magnesia specialties business produces magnesia-based chemical products and dolomitic lime.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock, derived from our proprietary method. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
According to GuruFocus's valuation method, Martin Marietta Materials Inc (MLM) is estimated to be fairly valued. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. As of now, Martin Marietta Materials has a market cap of $26.70 billion and the stock is estimated to be fairly valued.
As Martin Marietta Materials is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength of Martin Marietta Materials
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage can provide a great understanding of a company's financial strength. Martin Marietta Materials has a cash-to-debt ratio of 0.08, which is worse than 83.92% of companies in the Building Materials industry. The overall financial strength of Martin Marietta Materials is 5 out of 10, which indicates that the financial strength of Martin Marietta Materials is fair.
Profitability and Growth of Martin Marietta Materials
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Martin Marietta Materials has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $6.50 billion and Earnings Per Share (EPS) of $15.24. Its operating margin is 20.63%, which ranks better than 86.1% of companies in the Building Materials industry. Overall, the profitability of Martin Marietta Materials is ranked 9 out of 10, which indicates strong profitability.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Martin Marietta Materials is 9.3%, which ranks better than 64.27% of companies in the Building Materials industry. The 3-year average EBITDA growth is 12.4%, which ranks better than 70.64% of companies in the Building Materials industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Martin Marietta Materials's ROIC was 7.56, while its WACC came in at 8.41.
In summary, the stock of Martin Marietta Materials Inc (MLM, Financial) is estimated to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 70.64% of companies in the Building Materials industry. To learn more about Martin Marietta Materials stock, you can check out its 30-Year Financials here.
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