Is Eagle Materials (EXP) Pricing Look Attractive After Recent 3.8% Share Price Pullback

• If you are wondering whether Eagle Materials at about US$212.72 is offering good value or asking too much, the answer depends on which valuation lens you use.
• The stock is roughly flat so far this year, with a 0.6% year to date return, after a 6.7% return over the past year and a recent 7 day period where the share price declined 3.8%.
• Recent coverage around US construction activity and materials demand has kept investors focused on companies like Eagle Materials, as they try to gauge how resilient volumes and pricing could be. At the same time, commentary on input costs and project pipelines has added extra context for how investors assess risk around the current share price.
• Simply Wall St currently assigns Eagle Materials a valuation score of 4 out of 6, based on checks of where the stock screens as undervalued. Next, you will see how traditional methods like P/E, P/B and discounted cash flow compare, along with a different way of thinking about valuation that may give you a fuller picture by the end of the article.

Find out why Eagle Materials's 6.7% return over the last year is lagging behind its peers.

Approach 1: Eagle Materials Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a stock could be worth by projecting future cash flows and then discounting them back to today, using a required return as the discount rate.

For Eagle Materials, the model uses a 2 Stage Free Cash Flow to Equity approach, anchored on last twelve months free cash flow of about $366.6 million. Analysts provide specific free cash flow projections out to 2029, including $540 million in 2029, and Simply Wall St then extrapolates estimates out to 2035 using these inputs.

Bringing all those projected cash flows back to today and adding them up gives an estimated intrinsic value of about $394.25 per share under this DCF approach. Compared with the recent share price of about $212.72, the model implies the stock trades at a 46.0% discount to this intrinsic value, which indicates that Eagle Materials appears undervalued on this specific cash flow lens.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Eagle Materials is undervalued by 46.0%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Eagle Materials.

Approach 2: Eagle Materials Price vs Earnings

For profitable companies, the P/E ratio is a useful way to see how much you are paying for each dollar of current earnings, which makes it a simple cross check against more complex models like a DCF.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher growth or lower perceived risk can support a higher P/E, while slower growth or higher risk often lines up with a lower P/E.

Eagle Materials currently trades on a P/E of about 15.53x. That is close to the wider Basic Materials industry average of 15.35x and below the peer group average of 25.76x, so the stock sits toward the lower end of that peer range.

Simply Wall St’s Fair Ratio for Eagle Materials is 17.76x. This is a proprietary estimate of what a reasonable P/E could be, given factors such as the company’s earnings growth profile, profit margins, industry, market cap and key risks. Because it adjusts for these company specific drivers, it can be more informative than a plain comparison with industry or peer averages.

Comparing the Fair Ratio of 17.76x with the current P/E of 15.53x suggests Eagle Materials screens as undervalued on this earnings multiple check.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Eagle Materials Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as a simple story you build around Eagle Materials. This connects your assumptions for future revenue, earnings and margins to a fair value estimate, helps you compare that fair value with the current price to decide whether the stock looks attractive or not, and then automatically refreshes when new information such as earnings or news is added on Simply Wall St’s Community page. This is why different investors can look at the same data and still arrive at very different views, such as a fair value closer to the most optimistic analyst target of about US$246, or nearer the cautious end around US$200.

Do you think there's more to the story for Eagle Materials? Head over to our Community to see what others are saying!

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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