Eagle Materials Inc EXP:NYSE

There has been several sectors and companies that have been literally beaten up by the continuous negative reports that are released regarding the present state of the housing market. These companies range from the sub-prime lenders such as New Century Financial to Home Depot. In the case of New Century it appears there is more than just bad news affecting this stock, but in the case of Home Depot it is primarily related to investor’s lack of confidence in the current housing market. Another embattled company that has very strong fundamentals and the potential for strong long-term PE growth is Eagle Materials, Inc. While a quick short-term profit appears unlikely; in the long-term this company’s fundamentals and history suggest it will prove to be a real long-term winner.


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