Following a daily gain of 7.39% and a 3-month loss of -3.13%, Martin Marietta Materials Inc (MLM, Financial) continues to generate intrigue among investors. The company's Earnings Per Share (EPS) stands at 15.24, prompting the critical question: Is the stock fairly valued? In this analysis, we delve into the intrinsic value of Martin Marietta Materials (MLM) to provide an informed answer. Let's unravel the financial tapestry of this leading construction aggregates producer.
Introducing Martin Marietta Materials Inc (MLM, Financial)
Martin Marietta Materials is one of the largest producers of construction aggregates in the United States, dealing in crushed stone, sand, and gravel. In 2022, the company sold 207 million tons of aggregates, with Texas, Colorado, North Carolina, Georgia, and Florida accounting for most of its sales. The company also produces cement in Texas and utilizes its aggregates in its asphalt and ready-mixed concrete businesses. Furthermore, Martin's magnesia specialties business produces magnesia-based chemical products and dolomitic lime.
At a price of $439.17 per share, Martin Marietta Materials has a market cap of $27.10 billion. The GF Value, an estimation of fair value, stands at $439.55, indicating that the stock is fairly valued. This assessment is based on the historical trading multiples, past returns and growth, and future business performance estimates.
Deciphering the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Martin Marietta Materials (MLM, Financial) stock is estimated to be fairly valued based on the GuruFocus Value calculation. This implies that the long-term return of its stock is likely to be close to the rate of its business growth.
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Assessing Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss. A company's cash-to-debt ratio and interest coverage provide a good understanding of its financial strength. Martin Marietta Materials has a cash-to-debt ratio of 0.08, which is worse than 85.08% of 362 companies in the Building Materials industry. The overall financial strength of Martin Marietta Materials is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Martin Marietta Materials has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $6.50 billion and Earnings Per Share (EPS) of $15.24. Its operating margin of 20.63% is better than 87.8% of 369 companies in the Building Materials industry. Overall, GuruFocus ranks Martin Marietta Materials's profitability as strong.
Growth is probably one of the most important factors in the valuation of a company. Martin Marietta Materials's 3-year average revenue growth rate is better than 64.23% of 355 companies in the Building Materials industry. Martin Marietta Materials's 3-year average EBITDA growth rate is 12.4%, which ranks better than 70.53% of 319 companies in the Building Materials industry.
ROIC vs 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 9.13.
Conclusion
In summary, the stock of Martin Marietta Materials (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 70.53% of 319 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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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.
