3 Reasons to Avoid MLM and 1 Stock to Buy Instead

Martin Marietta Materials trades at $662.45 per share and has stayed right on track with the overall market, gaining 10% over the last six months. At the same time, the S&P 500 has returned 10.2%.

Is now the time to buy Martin Marietta Materials, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Martin Marietta Materials Not Exciting?

We don't have much confidence in Martin Marietta Materials. Here are three reasons we avoid MLM and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Martin Marietta Materials’s 7.4% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the industrials sector.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Martin Marietta Materials’s revenue to rise by 5.5%. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

3. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Martin Marietta Materials’s EPS grew at a weak 3.9% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its flat revenue and tells us management responded to softer demand by adapting its cost structure.

Final Judgment

Martin Marietta Materials isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 30.7× forward P/E (or $662.45 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

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