MLM
Martin Marietta Materials, Inc.
$503.92
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Overvalued
Trading 48.9% above fair value
You pay
$503.92
Bear
$263.20
Fair
$338.40
Bull
$413.60
Bear
$263.20
-47.8%
$18.80 × 14x
Fair
$338.40
-32.8%
$18.80 × 18x
Bull
$413.60
-17.9%
$18.80 × 22x
Adjust Assumptions
18.0x
18.8$
Key Value Driver
Through-cycle normalized EPS ($18.80)
Implied Market Multiple
26.8x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (40 analysts)
$618.40
Divergence from AlphaVal
45%
Summary
Using 7-year normalized EPS of $18.80 at a 18x cycle multiple, the base-case value is $338.40 per share. P/TBV cross-check: 5.1x.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 5.1x is above the normal range for this type of business (0.7x-2.0x). The stock may already price in a strong cycle.
Wall Street's average price target is $618.40 (from 40 analysts). Our estimate is 45% below the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing