Everyone is selling, the charts are red, but should you panic? Not at all. As a long term investor, my favorite time of the economic cycle is when great stocks sell at an unjustified discount. Today I want to bring to light the market’s darling – Martin Marietta Materials, Inc.. Looking at its size, financial health and track record, I believe there’s an opportunity with Martin Marietta Materials during these volatile times.
Martin Marietta Materials, Inc., a natural resource-based building materials company, supplies aggregates and heavy building materials to the construction industry in the United States and internationally. Established in 1993, and led by CEO C. Nye, the company currently employs 8.71k people and with the company’s market capitalisation at US$12b, we can put it in the large-cap category. Size matters. The bigger the company is, the more well-resourced it is. The more money it produces from its operations which means it is less reliant on external funding. When times are bad in the market, being self-sufficient is extremely important as you can continue to operate at your own pace. Therefore, large cap companies are a great bet to invest in when you’re heading to the bottom of the cycle.
Martin Marietta Materials currently has US$3.1b debt on its books which requires regular servicing. This means it needs to have sufficient cash-on-hand to meet upcoming interest expenses. With an interest coverage ratio of 5.43x, Martin Marietta Materials produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Moreover, its operating cash flows amply covers its total debt by 23%, above the safe minimum of 20%. Its cash and short-term investment is also sufficient to cover other upcoming liabilities, which means MLM is financially robust in the face of a volatile market.
MLM’s profit growth over the previous five years has been positive, with an average annual rate of 34%, outperfoming the market growth rate of 12%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Martin Marietta Materials as a long-term hold.
Next Steps:Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. Martin Marietta Materials tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
- Future Outlook: What are well-informed industry analysts predicting for MLM’s future growth? Take a look at our free research report of analyst consensus for MLM’s outlook.
- Valuation: What is MLM worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MLM is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.