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Is Now The Time To Look At Buying Martin Marietta Materials, Inc. (NYSE:MLM)?

·3 min read

Martin Marietta Materials, Inc. (NYSE:MLM) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$405 at one point, and dropping to the lows of US$296. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Martin Marietta Materials' current trading price of US$310 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Martin Marietta Materials’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Martin Marietta Materials

What is Martin Marietta Materials worth?

Martin Marietta Materials is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 29.26x is currently well-above the industry average of 15.95x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Martin Marietta Materials’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Martin Marietta Materials look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 94% over the next couple of years, the future seems bright for Martin Marietta Materials. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? MLM’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MLM should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on MLM for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for MLM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Martin Marietta Materials, you'd also look into what risks it is currently facing. For example - Martin Marietta Materials has 2 warning signs we think you should be aware of.

If you are no longer interested in Martin Marietta Materials, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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