Martin Marietta Materials (MLM) Trading Near Best Value in a Decade

Martin Marietta Materials produces crushed stone, sand, and gravel. The stock has been a strong performer over the last decade, with 16.9% per year annualized returns, versus the S&P 500 which has produced 12.9% per year.

Right now it is trading at one of its best valuations in a decade, and the company is still increasing earnings faster than most S&P 500 stocks, which means it could continue to outperform the S&P 500 over the next five years.

Cory Mitchell, an analyst with Trading.biz commented “Analysts forecast MLM will grow EPS by 12.1% per year over the next five years. That outpaces the median expected growth of S&P 500 stocks, which is 9.4%.

Larger earnings growth often translates into better stock performance, especially when not overpaying for a stock. Right now MLM is trading near its lowest valuation in a decade. The current Price/Earnings ratio is 16.8. That is one of the lowest readings since 2012, as the P/E is rarely below 20.”

Here is why MLM is interesting right now:

• Track record of increasing earnings, averaging 33.7% yearly EPS growth over the last five years.
• Out of the last 14 earnings releases, the company has beat analyst expectations in 11 of them.
• Track record of increasing sales, averaging 8.8% yearly revenue growth over the last five years.
• Track record of increasing the dividend. The current dividend yield is 0.5%. That isn’t high, but MLM has been increasing the dividend amount by an average of 6.3% per year over the last decade.
• Financial health rating of “A” from Morningstar. That’s the highest financial health grade a company can receive.
• The company buys back shares, instead of issuing more shares. The former decreases the shares outstanding and helps bolster shareholder value, while the latter dilutes existing shareholders. The current buyback yield is 0.7%.
• The stock has been in an uptrend since 2023. The price pulled back in April and May, presenting an opportunity to buy as the price starts rising again.

Currently, the stock is presenting favorable statistics, and the pullback also presents an opportunity to buy at a cheaper price than what has been available recently.

There is always risk in investing though. Circumstances may change and the company may not be able to grow earnings at the rate expected. The stock may stabilize at a lower P/E than what it traded at prior.

Or a significant decline in the major indices drags nearly all stocks with it, which could mean a further price decline in MLM even if the outlook for the company remains favorable.

Consider risk tolerance, position size, and the plan for a trade before investing.