MLM
Martin Marietta Materials, Inc.
$536.48
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Overvalued
Trading 31.9% above fair value
You pay
$536.48
Bear
$298.19
Fair
$406.62
Bull
$515.05
Bear
$298.19
-44.4%
$18.80 × 14x + net cash
Fair
$406.62
-24.2%
$18.80 × 18x + net cash
Bull
$515.05
-4.0%
$18.80 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($18.80)
Implied Market Multiple
28.5x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $697.40 from 40 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $406.62 per share.
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 5.4x 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 $697.40 (from 40 analysts). Our estimate is 60% 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