DCF Studio

    MLM · NYQ · Basic Materials

    Martin Marietta Materials, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 95.48

    Market price

    USD 490.64

    Implied upside

    -80.5%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 11.8% of revenue against depreciation of 9.3%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 95.48-80.5%
    Exit multiple
    USD 369.17-24.8%
    Market price
    USD 490.64

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m463m927mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 6.1bnUSD 6.1bnUSD 6.1bnUSD 6.1bnUSD 6.1bn-0.1%
    EBITUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.4bnUSD 1.4bn-0.1%
    NOPATUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.1bnUSD 1.1bn-0.1%
    Add depreciation & amortisationUSD 572.4mUSD 572.1mUSD 571.8mUSD 571.4mUSD 571.1m-0.1%
    Less capital expenditureUSD -724.6mUSD -724.1mUSD -723.7mUSD -723.3mUSD -722.9m-0.1%
    Less increase in working capitalUSD 690.4kUSD 690.0kUSD 689.6kUSD 689.2kUSD 688.8k+0.1%
    Free cashflow to firmUSD 926.6mUSD 926.1mUSD 925.5mUSD 925.0mUSD 924.4m-0.1%
    Discount factor0.95390.86800.78980.71860.6539-
    Present valueUSD 883.9mUSD 803.8mUSD 731.0mUSD 664.7mUSD 604.5m-9.1%
    Present Value Of The ForecastUSD 3.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.068Reported 1.101, pulled toward 1.0 (Blume)
    Cost of equity10.87%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 34.8bn85.9% of capital
    Total debtUSD 5.7bn14.1% of capital, book value as a proxy
    Tax rate20.4%Effective, capped at statutory
    WACC9.90%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 95.48

    68% of EV

    Forecast FCFF, final year
    USD 924.4m
    Capex at depreciation, working capital in reinvestment
    USD 1.1bn
    Less reinvestment at g/ROIC (25.3% of NOPAT)
    USD -288.6m
    Capitalised
    USD 854.2m
    ROIC (WACC floor)
    9.9%
    Terminal value, undiscounted
    USD 11.8bn
    Terminal value, discounted
    USD 7.7bn
    Enterprise value
    USD 11.4bn
    Less net debt
    USD 5.6bn
    Equity value
    USD 5.8bn

    Exit at 19.4x EBITDA

    Value per shareUSD 369.17

    87% of EV

    Terminal value, undiscounted
    USD 37.2bn
    Terminal value, discounted
    USD 24.3bn
    Enterprise value
    USD 28.0bn
    Less net debt
    USD 5.6bn
    Equity value
    USD 22.4bn

    Spread between methods: 118%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.90%142.55143.40144.24145.09145.94
    8.90%115.65116.37117.09117.81118.54
    9.90%94.2494.8695.4896.1196.73
    10.90%76.8077.3477.8878.4378.97
    11.90%62.3362.8163.2863.7664.24

    Outlined: this model. Green text: above today's price of 490.64. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-0.1%30.6%+30.6pp
    EBIT margin22.0%67.6%+45.6pp
    Discount rate9.9%4.6%-5.3pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.