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Looking at Vulcan Materials Company’s (NYSE:VMC) fundamentals some investors are wondering if its last closing price of $136.42 represents a good value for money for this high growth stock. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.
Has the VMC train slowed down?
Vulcan Materials’s growth potential is very attractive. Expectations from 14 analysts are extremely bullish with earnings per share estimated to rise from today’s level of $3.996 to $6.168 over the next three years. This indicates an estimated earnings growth rate of 16% per year, on average, which signals a market-beating outlook in the upcoming years.
Is VMC’s share price justifiable by its earnings growth?
Vulcan Materials is looking rather expensive based on its price-to-earnings (PE) ratio of 34.14x. This illustrates that Vulcan Materials is overvalued compared to the US market average ratio of 17.92x , and overvalued based on current earnings compared to the Basic Materials industry average of 28.21x .
After looking at VMC’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. However, to properly examine the value of a high-growth stock such as Vulcan Materials, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 34.14x and expected year-on-year earnings growth of 16% give Vulcan Materials a quite high PEG ratio of 2.19x. This tells us that when we include its growth in our analysis Vulcan Materials’s stock can be considered overvalued , based on the fundamentals.
What this means for you:
VMC’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Are VMC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has VMC been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of VMC’s historicals for more clarity.
- 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.