Is It Too Late To Consider Buying Eagle Materials Inc. (NYSE:EXP)?

Eagle Materials Inc. (NYSE:EXP), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$151 at one point, and dropping to the lows of US$131. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Eagle Materials' current trading price of US$139 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Eagle Materials’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Eagle Materials

What Is Eagle Materials Worth?

Good news, investors! Eagle Materials is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Eagle Materials’s ratio of 11.5x is below its peer average of 21.57x, which indicates the stock is trading at a lower price compared to the Basic Materials industry. What’s more interesting is that, Eagle Materials’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Eagle Materials?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Eagle Materials, it is expected to deliver a relatively unexciting earnings growth of 8.9%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since EXP is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on EXP for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EXP. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Eagle Materials at this point in time. While conducting our analysis, we found that Eagle Materials has 2 warning signs and it would be unwise to ignore them.

If you are no longer interested in Eagle Materials, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.