Martin Marietta Materials, Inc. ($MLM) Return on Assets of 0.056194: Is it Enough?

{csv|m:251|id:21|s:Company}} (MLM) is boasting an Return on Assets number of 0.056194. ROA tells an investor how much after-tax profit a company generated for each $1 in assets. In other words, ROA measures a company’s net earnings in relation to all of the resources it had at its disposal—the shareholders’ capital plus short and long-term borrowed funds. Thus, return on assets is the most stringent test of return to shareholders. 

Defining specific goals and creating an overall stock trading strategy can be a big help for the individual investor. Some investors are only interested in buy and hold strategies, while others will opt to try and capitalize on short-term market movements. Investors may also decide to do a little bit of both. They may choose a selection of stocks that they plan on holding for a long time, and they may choose others that they plan on holding for only a short period of time. Whichever way the investor decides to go, they should be prepared to complete all the research. Whether they want to study the fundamentals, technicals, or both, finding quality stocks may be at the forefront of the search.  

FCF on Debt

Another ratio S&P Analyst Richard Tortoriello recommends to use is ‘Free Cash Flow to debt’. (‘Quantitative Strategies for Achieving Alpha’) This ratio shows how long it would take a company to pay back its debt using its current level of free cash flow. In his study, Tortoriello found that investing in the top 20% companies with the highest FCF/debt ratio generated substantially higher returns compared to the market.

Formula:

FCF on Debt = (Cash Flow from Operations−Capital Expenditure) / Total Debt

The FCF on debt number for Martin Marietta Materials, Inc. (MLM) stands at 0.064676.

Net Debt to Market Cap

This ratio gives a sense of how much debt a company has relative to its market value. Companies with high debt levels compared to their peers can be volatile. We calculate it as follows:

Net Debt to Market Cap = (Total Debt−Cash and ST Investments) / Market Cap

Martin Marietta Materials, Inc. (MLM) has a net debt to market cap ratio of 0.064676.

FCF

Free Cash Flow Growth (FCF Growth) is the free cash flow of the current year minus the free cash flow from the previous year, divided by last year’s free cash flow. The FCF Yield of Martin Marietta Materials, Inc. (MLM) is 0.013369. Free cash flow (FCF) is the cash produced by the company minus capital expenditure. This cash is what a company uses to meet its financial obligations, such as making payments on debt or to pay out dividends. The 5 Year FCF Yield of Martin Marietta Materials, Inc. (MLM) is 0.012017. Experts say the higher the value, the better, as it means that the free cash flow is high, or the variability of free cash flow is low or both.

Most investors are more familiar with P/B or Price-to-book. This is just the inverted value.

Price-to-Book Ratio = Market Cap divided by Common Shareholders Equity

Market watchers may also be following some quality ratios for Martin Marietta Materials, Inc. (MLM). Robert Novy-Marx, a professor at the university of Rochester, discovered that gross profitability – a quality factor – has as much power predicting stock returns as traditional value metrics. He found that while other quality measures had some predictive power, especially on small caps and in conjunction with value measures, gross profitability generates significant excess returns as a stand alone strategy, especially on large cap stocks.The Gross profitability for (MLM) is 0.101681.
M-Score (Beneish)

The M-Score, conceived by accounting professor Messod Beneish, is a model for detecting whether a company has manipulated their earnings numbers or not. Martin Marietta Materials, Inc. (MLM) has an M-Score of -1.480355. The M-Score is based on 8 different variables: Days’ sales in receivables index, Gross Margin Index, Asset Quality Index, Sales Growth Index, Depreciation Index, Sales, General and Administrative expenses Index, Leverage Index and Total Accruals to Total Assets. A score higher than -1.78 is an indicator that the company might be manipulating their numbers.

Checking in on some valuation rankings, Martin Marietta Materials, Inc. (MLM) has a Value Composite score of 39. Developed by James O’Shaughnessy, the VC score uses five valuation ratios. These ratios are price to earnings, price to cash flow, EBITDA to EV, price to book value, and price to sales. The VC is displayed as a number between 1 and 100. In general, a company with a score closer to 0 would be seen as undervalued, and a score closer to 100 would indicate an overvalued company. Adding a sixth ratio, shareholder yield, we can view the Value Composite 2 score which is currently sitting at 33.

Individual investors are constantly hearing about the next hot stock to buy. Acting purely on these types of tips can be hazardous to the portfolio if the research is not completed. Sometimes these stock tips will pan out and be correct, other times they can leave the investor wondering why they acted on the speculative advice. Even if a stock tip is correct, the results may have already been manifested and the investor would simply be getting in way too late. Knowing what information is reliable can drastically improve the chances of making smarter stock picks. Even the most praised stocks may not be able to withstand an overall market downturn.    

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