Intrinsic value of Martin Marietta Materials, Inc. - MLM

Previous Close

$212.35

  Intrinsic Value

$65.56

stock screener

  Rating & Target

str. sell

-69%

Previous close

$212.35

 
Intrinsic value

$65.56

 
Up/down potential

-69%

 
Rating

str. sell

We calculate the intrinsic value of MLM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 13.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.10
  5.09
  5.08
  5.07
  5.07
  5.06
  5.05
  5.05
  5.04
  5.04
  5.03
  5.03
  5.03
  5.03
  5.02
  5.02
  5.02
  5.02
  5.02
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.01
  5.00
Revenue, $m
  4,460
  4,687
  4,926
  5,176
  5,438
  5,713
  6,001
  6,304
  6,622
  6,956
  7,306
  7,674
  8,060
  8,465
  8,890
  9,336
  9,805
  10,297
  10,813
  11,355
  11,924
  12,522
  13,149
  13,808
  14,499
  15,225
  15,988
  16,788
  17,628
  18,510
Variable operating expenses, $m
  3,656
  3,827
  4,007
  4,196
  4,394
  4,601
  4,819
  5,048
  5,288
  5,539
  5,514
  5,791
  6,082
  6,388
  6,709
  7,046
  7,399
  7,771
  8,160
  8,569
  8,999
  9,450
  9,923
  10,420
  10,942
  11,490
  12,065
  12,669
  13,303
  13,969
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  3,656
  3,827
  4,007
  4,196
  4,394
  4,601
  4,819
  5,048
  5,288
  5,539
  5,514
  5,791
  6,082
  6,388
  6,709
  7,046
  7,399
  7,771
  8,160
  8,569
  8,999
  9,450
  9,923
  10,420
  10,942
  11,490
  12,065
  12,669
  13,303
  13,969
Operating income, $m
  804
  860
  918
  980
  1,044
  1,112
  1,182
  1,257
  1,335
  1,417
  1,792
  1,883
  1,977
  2,077
  2,181
  2,290
  2,405
  2,526
  2,653
  2,786
  2,925
  3,072
  3,226
  3,387
  3,557
  3,735
  3,922
  4,119
  4,325
  4,541
EBITDA, $m
  1,386
  1,456
  1,530
  1,608
  1,689
  1,775
  1,864
  1,959
  2,057
  2,161
  2,270
  2,384
  2,504
  2,630
  2,762
  2,900
  3,046
  3,199
  3,359
  3,528
  3,705
  3,890
  4,085
  4,290
  4,504
  4,730
  4,967
  5,215
  5,476
  5,751
Interest expense (income), $m
  74
  169
  181
  195
  209
  223
  239
  255
  272
  289
  308
  328
  348
  370
  392
  416
  441
  467
  495
  523
  554
  585
  619
  654
  691
  729
  770
  812
  857
  904
  953
Earnings before tax, $m
  636
  679
  724
  771
  821
  873
  928
  985
  1,045
  1,108
  1,465
  1,535
  1,608
  1,684
  1,765
  1,850
  1,938
  2,031
  2,129
  2,232
  2,340
  2,453
  2,572
  2,697
  2,828
  2,965
  3,110
  3,262
  3,421
  3,588
Tax expense, $m
  172
  183
  195
  208
  222
  236
  250
  266
  282
  299
  396
  414
  434
  455
  477
  499
  523
  549
  575
  603
  632
  662
  694
  728
  764
  801
  840
  881
  924
  969
Net income, $m
  464
  495
  528
  563
  599
  637
  677
  719
  763
  809
  1,069
  1,120
  1,174
  1,230
  1,288
  1,350
  1,415
  1,483
  1,554
  1,629
  1,708
  1,791
  1,878
  1,969
  2,064
  2,165
  2,270
  2,381
  2,497
  2,619

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  10,046
  10,557
  11,094
  11,657
  12,247
  12,867
  13,517
  14,199
  14,915
  15,667
  16,456
  17,283
  18,153
  19,065
  20,022
  21,028
  22,083
  23,191
  24,354
  25,575
  26,857
  28,202
  29,615
  31,099
  32,656
  34,291
  36,008
  37,810
  39,703
  41,690
Adjusted assets (=assets-cash), $m
  10,046
  10,557
  11,094
  11,657
  12,247
  12,867
  13,517
  14,199
  14,915
  15,667
  16,456
  17,283
  18,153
  19,065
  20,022
  21,028
  22,083
  23,191
  24,354
  25,575
  26,857
  28,202
  29,615
  31,099
  32,656
  34,291
  36,008
  37,810
  39,703
  41,690
Revenue / Adjusted assets
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
  0.444
Average production assets, $m
  6,062
  6,370
  6,694
  7,034
  7,390
  7,764
  8,156
  8,568
  9,000
  9,453
  9,929
  10,429
  10,953
  11,504
  12,081
  12,688
  13,325
  13,993
  14,695
  15,432
  16,205
  17,017
  17,870
  18,765
  19,705
  20,691
  21,727
  22,815
  23,957
  25,156
Working capital, $m
  972
  1,022
  1,074
  1,128
  1,185
  1,245
  1,308
  1,374
  1,444
  1,516
  1,593
  1,673
  1,757
  1,845
  1,938
  2,035
  2,137
  2,245
  2,357
  2,475
  2,599
  2,730
  2,867
  3,010
  3,161
  3,319
  3,485
  3,660
  3,843
  4,035
Total debt, $m
  3,358
  3,604
  3,863
  4,134
  4,419
  4,717
  5,031
  5,359
  5,705
  6,067
  6,447
  6,846
  7,265
  7,705
  8,166
  8,651
  9,159
  9,693
  10,254
  10,842
  11,460
  12,109
  12,790
  13,505
  14,256
  15,044
  15,871
  16,740
  17,652
  18,610
Total liabilities, $m
  4,842
  5,089
  5,347
  5,618
  5,903
  6,202
  6,515
  6,844
  7,189
  7,551
  7,932
  8,331
  8,750
  9,189
  9,651
  10,135
  10,644
  11,178
  11,738
  12,327
  12,945
  13,594
  14,275
  14,990
  15,740
  16,528
  17,356
  18,225
  19,137
  20,095
Total equity, $m
  5,204
  5,469
  5,747
  6,038
  6,344
  6,665
  7,002
  7,355
  7,726
  8,115
  8,524
  8,953
  9,403
  9,876
  10,372
  10,892
  11,439
  12,013
  12,615
  13,248
  13,912
  14,609
  15,341
  16,109
  16,916
  17,763
  18,652
  19,586
  20,566
  21,595
Total liabilities and equity, $m
  10,046
  10,558
  11,094
  11,656
  12,247
  12,867
  13,517
  14,199
  14,915
  15,666
  16,456
  17,284
  18,153
  19,065
  20,023
  21,027
  22,083
  23,191
  24,353
  25,575
  26,857
  28,203
  29,616
  31,099
  32,656
  34,291
  36,008
  37,811
  39,703
  41,690
Debt-to-equity ratio
  0.650
  0.660
  0.670
  0.680
  0.700
  0.710
  0.720
  0.730
  0.740
  0.750
  0.760
  0.760
  0.770
  0.780
  0.790
  0.790
  0.800
  0.810
  0.810
  0.820
  0.820
  0.830
  0.830
  0.840
  0.840
  0.850
  0.850
  0.850
  0.860
  0.860
Adjusted equity ratio
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518
  0.518

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  464
  495
  528
  563
  599
  637
  677
  719
  763
  809
  1,069
  1,120
  1,174
  1,230
  1,288
  1,350
  1,415
  1,483
  1,554
  1,629
  1,708
  1,791
  1,878
  1,969
  2,064
  2,165
  2,270
  2,381
  2,497
  2,619
Depreciation, amort., depletion, $m
  581
  596
  612
  628
  645
  663
  682
  702
  723
  744
  477
  501
  527
  553
  581
  610
  641
  673
  706
  742
  779
  818
  859
  902
  947
  995
  1,045
  1,097
  1,152
  1,209
Funds from operations, $m
  1,046
  1,092
  1,140
  1,191
  1,244
  1,300
  1,359
  1,421
  1,486
  1,554
  1,547
  1,622
  1,700
  1,783
  1,869
  1,960
  2,056
  2,156
  2,261
  2,371
  2,487
  2,609
  2,737
  2,871
  3,012
  3,160
  3,315
  3,478
  3,649
  3,829
Change in working capital, $m
  47
  49
  52
  54
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  93
  97
  102
  107
  113
  118
  124
  130
  137
  144
  151
  158
  166
  174
  183
  192
Cash from operations, $m
  998
  1,042
  1,088
  1,137
  1,187
  1,241
  1,296
  1,355
  1,416
  1,481
  1,470
  1,541
  1,616
  1,694
  1,777
  1,863
  1,953
  2,049
  2,148
  2,253
  2,363
  2,479
  2,600
  2,727
  2,861
  3,001
  3,149
  3,303
  3,466
  3,636
Maintenance CAPEX, $m
  -277
  -291
  -306
  -322
  -338
  -355
  -373
  -392
  -412
  -433
  -454
  -477
  -501
  -527
  -553
  -581
  -610
  -641
  -673
  -706
  -742
  -779
  -818
  -859
  -902
  -947
  -995
  -1,045
  -1,097
  -1,152
New CAPEX, $m
  -295
  -309
  -324
  -340
  -356
  -374
  -392
  -412
  -432
  -453
  -476
  -500
  -524
  -550
  -578
  -607
  -637
  -668
  -702
  -737
  -773
  -812
  -853
  -895
  -940
  -987
  -1,036
  -1,088
  -1,142
  -1,199
Cash from investing activities, $m
  -572
  -600
  -630
  -662
  -694
  -729
  -765
  -804
  -844
  -886
  -930
  -977
  -1,025
  -1,077
  -1,131
  -1,188
  -1,247
  -1,309
  -1,375
  -1,443
  -1,515
  -1,591
  -1,671
  -1,754
  -1,842
  -1,934
  -2,031
  -2,133
  -2,239
  -2,351
Free cash flow, $m
  426
  442
  458
  475
  493
  511
  531
  551
  572
  595
  540
  564
  590
  617
  646
  675
  707
  739
  774
  810
  848
  888
  929
  973
  1,019
  1,067
  1,118
  1,171
  1,227
  1,286
Issuance/(repayment) of debt, $m
  237
  246
  259
  271
  285
  299
  313
  329
  345
  362
  380
  399
  419
  440
  462
  485
  509
  534
  561
  589
  618
  649
  681
  715
  751
  788
  827
  869
  912
  958
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  237
  246
  259
  271
  285
  299
  313
  329
  345
  362
  380
  399
  419
  440
  462
  485
  509
  534
  561
  589
  618
  649
  681
  715
  751
  788
  827
  869
  912
  958
Total cash flow (excl. dividends), $m
  663
  689
  717
  746
  777
  810
  844
  880
  918
  957
  920
  964
  1,009
  1,057
  1,107
  1,160
  1,215
  1,273
  1,334
  1,398
  1,466
  1,536
  1,610
  1,688
  1,770
  1,855
  1,945
  2,040
  2,139
  2,243
Retained Cash Flow (-), $m
  -257
  -265
  -278
  -292
  -306
  -321
  -337
  -353
  -371
  -389
  -409
  -429
  -450
  -473
  -496
  -521
  -547
  -574
  -602
  -632
  -664
  -697
  -732
  -768
  -807
  -847
  -889
  -934
  -980
  -1,029
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  406
  424
  439
  455
  472
  489
  507
  527
  547
  568
  512
  535
  559
  584
  611
  639
  669
  700
  732
  766
  802
  839
  878
  920
  963
  1,008
  1,056
  1,106
  1,159
  1,214
Discount rate, %
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
  381
  371
  356
  339
  321
  301
  280
  259
  237
  214
  166
  148
  130
  113
  97
  82
  68
  55
  44
  35
  27
  20
  15
  11
  8
  5
  4
  2
  1
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Martin Marietta Materials, Inc. is a supplier of aggregates products (crushed stone, sand, and gravel) used for the construction of infrastructure, nonresidential, and residential projects. Aggregates products are also used for railroad ballast and in agricultural, utility and environmental applications. The Company's Aggregates business operates through three segments: the Mid-America Group, Southeast Group and West Group. The Company's business is categorized into Aggregates Business, Cement Business and Magnesia Specialties Business. Its Cement business is reported through the Cement segment. Its Magnesia Specialties business manufactures and markets magnesia-based chemical products used in industrial, agricultural, and environmental applications, and dolomitic lime sold to customers in the steel industry. Its Cement business produces Portland and specialty cements. It manufactures and markets, through its Magnesia Specialties business, magnesia-based chemical products.

FINANCIAL RATIOS  of  Martin Marietta Materials, Inc. (MLM)

Valuation Ratios
P/E Ratio 31.6
Price to Sales 3.5
Price to Book 3.2
Price to Tangible Book
Price to Cash Flow 19.8
Price to Free Cash Flow 45.9
Growth Rates
Sales Growth Rate 7.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 21.7%
Cap. Spend. - 3 Yr. Gr. Rate 20.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 36.4%
Total Debt to Equity 40.7%
Interest Coverage 9
Management Effectiveness
Return On Assets 6.7%
Ret/ On Assets - 3 Yr. Avg. 5.1%
Return On Total Capital 7.4%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 10.4%
Return On Equity - 3 Yr. Avg. 7.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 23.8%
Gross Margin - 3 Yr. Avg. 20.6%
EBITDA Margin 25.3%
EBITDA Margin - 3 Yr. Avg. 21.7%
Operating Margin 17.5%
Oper. Margin - 3 Yr. Avg. 13.9%
Pre-Tax Margin 15.9%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 11.1%
Net Profit Margin - 3 Yr. Avg. 8.2%
Effective Tax Rate 30%
Eff/ Tax Rate - 3 Yr. Avg. 32.8%
Payout Ratio 24.7%

MLM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MLM stock intrinsic value calculation we used $4244 million for the last fiscal year's total revenue generated by Martin Marietta Materials, Inc.. The default revenue input number comes from 0001 income statement of Martin Marietta Materials, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MLM stock valuation model: a) initial revenue growth rate of 5.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.6%, whose default value for MLM is calculated based on our internal credit rating of Martin Marietta Materials, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Martin Marietta Materials, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MLM stock the variable cost ratio is equal to 82.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MLM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Martin Marietta Materials, Inc..

Corporate tax rate of 27% is the nominal tax rate for Martin Marietta Materials, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MLM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MLM are equal to 135.9%.

Life of production assets of 20.8 years is the average useful life of capital assets used in Martin Marietta Materials, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MLM is equal to 21.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4946.363 million for Martin Marietta Materials, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 62.429 million for Martin Marietta Materials, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Martin Marietta Materials, Inc. at the current share price and the inputted number of shares is $13.3 billion.

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