Company Background
Eagle Materials Inc. (EXP) is primarily a holding company. Through its subsidiaries, the Company is engaged in the manufacture of basic building materials, including gypsum wallboard, cement, gypsum and non-gypsum paperboard, and concrete and aggregates. It operates in four business segments: Gypsum Wallboard, Cement, Recycled Paperboard, and Concrete and Aggregates. These operations are conducted in the United States, and include the mining of gypsum, and the manufacture and sale of gypsum wallboard; the mining of limestone, and the manufacture, production, distribution and sale of Portland cement; the manufacture and sale of recycled paperboard to the gypsum wallboard industry and other paperboard converters, and the sale of readymix concrete, and the mining and sale of aggregates (crushed stone, sand and gravel). These products are used primarily in commercial and residential construction, public construction projects, and projects to build, expand and repair roads and highways.
Notes about the Company
The company is currently trading around an 11 PE Ratio based on current year estimates of earnings, while the industry average PE ratio is 18, and S&P 500 is 17.
This information would suggest the stock is artificially depressed; however, it is good to keep in mind that the any construction related stock may or may not be artificially depressed, however, Eagle Materials appears to have an above average financial strength, which when the market begins to revalue the company based on fundamentals the stock price should begin to appreciate. See company fundamentals below:
Click On Image to Enlarge
Click On Image to Enlarge
It can be seen from the above financial ratios that the company is outperforming its industry and the S&P 500 in most categories. This appears to be a very strong indicator that the company in the long-term will provide a very a good return on investment. Once the housing and mortgage woes have subsided the market will begin to search for the strong performers within this sector and it appears that Eagle Materials may have the characteristics the market will seek after.
The company also has a PEG ratio well below 1 at .38, and a current dividend yield of 1.60%.
Disclosures
* - Currently do not own EXP
* - No other relationship with EXP
For those participating in this forum; what are your thoughts on this company? Do you think it will prove to be a good long-term investment? Please share your comments. I am just in the beginning stages of researching this company, but it appears it may be a superb long-term investment (hold at least 24 months).
Current Sentiment = Buy
Related Links
http://eaglematerials.com/
http://finance.yahoo.com/q?s=exp
1 comment:
The following are highlights from a CEO presentation that took place today.
*Because of the supply/demand metrics, over 25% of U.S. cement demand has to be filled with high-cost, low-margin cement.
*Over 85% of the U.S. domestic cement output is controlled by foreign multi-nationals. (Last I heard it was 80%. Ash Grove, TXI, and EXP are the only major U.S.-owned cement producers left I think).
*Worldwide & U.S. demand for cement remains at record levels. EXP price increases that were delayed in January because of bad weather will be implemented this spring.
*EXP wallboard price in February was $142/msf, which Rowley pointed out was still very profitable.
*Minimal industry wallboard capacity will online this year...more in '08 and '09, particularly in the N.E. Still expects industry capacity utilization to be at 85% this year.
*Long-term outlook for wallboard looks bright because of immigration and that 40% of the U.S. housing stock is greater than 50 years old.
*South Carolina wallboard plant is on schedule and on budget. Completion this fall.
*Illinois Cement expansion exceeded their expectations, coming in under budget.
*Expects very little further wallboard industry consolidation.
*The new synthetic gypsum wallboard plants (ie South Carolina) that will come online in the future are much more efficient, lower-cost operations. The implication was that some of the higher-cost natural gypsum plants are extinct and will going away.
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