Martin Marietta Materials has had an impressive run over the past six months as its shares have beaten the S&P 500 by 6.2%. The stock now trades at $654.86, marking a 16.3% gain. This run-up might have investors contemplating their next move.

Is there a buying opportunity in Martin Marietta Materials, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is Martin Marietta Materials Not Exciting?

We’re happy investors have made money, but we don't have much confidence in Martin Marietta Materials. Here are three reasons why MLM doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Martin Marietta Materials’s 7.4% annualized revenue growth over the last five years was mediocre. This was below our standard 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%. While this projection suggests its newer products and services will spur better top-line performance, it is still below average for the sector.

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. With its shares outperforming the market lately, the stock trades at 29.9× forward P/E (or $654.86 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

Stocks We Like More Than Martin Marietta Materials

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