Unveiling Vulcan Materials Co (VMC)'s Value: Is It Really Priced Right? A Comprehensive Guide
As of October 6, 2023, Vulcan Materials Co (NYSE:VMC) has seen a daily gain of 2.24% and a three-month loss of 6.02%. With an Earnings Per Share (EPS) (EPS) of 5.43, the question arises: is the stock fairly valued? This article aims to answer this question by providing a thorough analysis of the company's valuation. So, let's dive in.
Company Introduction
Vulcan Materials Co, the United States' largest producer of construction aggregates, operates in major markets like Texas, California, Virginia, Tennessee, Georgia, Florida, North Carolina, and Alabama. In 2022, the company sold significant volumes of aggregates, asphalt mix, and ready-mix. As of the end of 2022, the company had nearly 16 billion tons of aggregates reserves. The company's current stock price is $211.59, and it has a market cap of $28.10 billion. Comparing this price with the GF Value of $230.42, we can start to gauge whether the stock is over, under, or fairly valued.
Understanding the GF Value
The GF Value is a proprietary valuation model that considers historical multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GF Value calculation, Vulcan Materials Co stock shows every sign of being fairly valued. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Checking the financial strength of a company before buying its stock is crucial. Investing in companies with poor financial strength have a higher risk of permanent loss. A great way to understand the financial strength of a company is by looking at the cash-to-debt ratio and interest coverage. Vulcan Materials Co has a cash-to-debt ratio of 0.04, which is worse than 91.6% of 357 companies in the Building Materials industry. The overall financial strength of Vulcan Materials Co is 6 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. A company with high profit margins is usually a safer investment than those with low profit margins. Vulcan Materials Co has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $7.60 billion and an EPS of $5.43. Its operating margin is 15.54%, ranking better than 79.67% of 364 companies in the Building Materials industry. Overall, the profitability of Vulcan Materials Co is ranked 9 out of 10, indicating strong profitability.
Growth is probably the most important factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Vulcan Materials Co is 14%, ranking better than 77.4% of 354 companies in the Building Materials industry. The 3-year average EBITDA growth rate is 6.9%, ranking better than 60.38% of 318 companies in the Building Materials industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. 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. For the past 12 months, Vulcan Materials Co's return on invested capital is 6.63, and its cost of capital is 8.74.
Conclusion
Overall, Vulcan Materials Co (NYSE:VMC) stock shows every sign of being fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 60.38% of 318 companies in the Building Materials industry. To learn more about Vulcan Materials Co 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.
This article first appeared on GuruFocus.
