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Vulcan Materials (NYSE:VMC) is the leading producer of aggregates in the US. It also manufactures cement, concrete and asphalt and is geographically focused on the Sunbelt. VMC came into the idea pipeline as it is a 5 star wide-moat rated company. It currently trades at ~ $36-38.

Please refer to the quick review explained post if you want more information on what I look for in this type of review.

1- Business Performance Risk (--) and Intrinsic Returns (-)

Metric

Status

FCF / Sales

Last twelve months: 8.7%. Historically has been quite volatile ranging from 2% to 15%

ROE

LTM: -.5%! ROE has historically been between 10% and 20% but crashed to 0% in 2008-09

ROA

LTM:-.3%! ROA has been low in the last couple of year after having ranged between 5 and 13% over the last 10 years

Revenue Growth

LTM: 2%, after a full year 2009 at -26%. Overall growth has been very cyclical over the last 10 years with years at +20% followed by years at -15%!

Cash distribution to shareholders

Dividend yield is currently 2.6% on a payout of 30% pre 2008 (since then earnings have been 0 or negative!)

The company has increased its # of shares over the last 5 years by 15%

This is not a business for me. Cyclical free cash flow and revenues, low and even negative ROE/ROAs in the recent past, and a dividend counterbalanced by net share increase.

2- Balance Sheet Risk (=)

Metric

Status

LT Debt / Equity

0.5x, decreasing from 0.6x in 2008

Current Ratio

0.81x

The company carries quite a bit of debt, which is surprising given its cyclical and even negative cash flow. Current ratio is aggressive, although in line with what VMC has done in the past

3- Valuation Risk (-)

Metric

Status

Cash Return

2.8%

P/E

Negative earnings!

What else is there to say? Negative earnings and almost 0 Free Cash Flow.

Conclusion

No and no. I'm not sure what Morningstar’s analyst was on that day…

Obviously I won’t perform a more in-depth company analysis.

Disclosure: No position