Shares of U.S. Concrete Inc. (USCR - Free Report) , a provider of ready-mixed concrete and concrete-related products and services, rallied 12.4% since Harvey wreaked havoc on Aug 25. Demand for building materials for the repair of damaged properties is expected to increase, thus boosting the top line for building material companies.
Also, this Zacks Rank #2 (Buy) company has solid prospects and should make a valuable addition to your portfolio. Let us delve deeper into the other factors which make this stock a lucrative pick.
Earnings History and Future Estimates
U.S. Concrete has remarkably beaten earnings estimates in three of the trailing four quarters, recording average beat of 60.6%.
Furthermore, the Zacks Consensus Estimate for its current-year earnings increased 0.2% over the last 60 days, while next year’s earnings estimates rose 1.9%. Again, the company has a long term (3-5 years) expected EPS growth of 10%. These positive earnings estimate revisions show analysts’ confidence in the stock.
Stock Price & Other Returns
Shares of U.S. Concrete have returned 13.1% so far this year, comparing favorably with its industry’s gain of 3.3%. That said, we have noticed that the company has outperformed the industry in each of 4-week, 12-week and 52-week time frames.
Furthermore, the Return on Equity delivered in the trailing 12 months is around 20.2%, while the industry returned 7.7%, reflecting the company’s efficiency in using shareholders’ funds.
Valuation Looks Rational
U.S. Concrete has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this perspective.
The company currently has a trailing 12-months Price-to-Earnings (P/E) ratio of 23.4, while the industry’s average stands at 24.9. Moreover, its forward P/E ratio (price compared to this year’s earnings) is lower at 20.66. This indicates that a slightly more value-oriented path may be ahead for U.S. Concrete.
Looking at the company’s sales, the company currently trades at a Price-to-sales (P/S) ratio of 0.9, significantly lower than the S&P 500 average of 3.1. Some prefer this metric more than other value-focused ones because sales are harder to manipulate with accounting tricks than earnings.
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health of a business. U.S. Concrete has a P/CF of 12.7, lower than the industry’s average of 19.
All these ratios show that the company is undervalued in comparison to its industry peers and thus it a good time to place a bet on the stock.
Earnings & Revenue Growth
U.S. Concrete makes a great pick in terms of growth investment. The company has put up a historical EPS growth rate (average trailing 12-month EPS growth rate over the last 3-5 years of actual earnings) of 64.9%, compared with the industry average of 20.5%.
For 2017, the company’s earnings are likely to grow 44.9%, while its industry’s average calls for just 30.3% growth.
Meanwhile, consolidated revenues for the first six months of 2017 increased 22.9% driven by higher volume and pricing in both ready-mixed concrete and aggregate products. Notably, the company’s sales growth in 2017 is projected at around 18.7%.
For all these reasons, the company currently has a Growth Score of B on our style score system that helps us identify potential outperformers.
U.S. Concrete is expected to perform well in the quarters ahead, given its strong fundamentals. Moreover, the company’s VGM Score of B coupled with a Zacks Rank #2 makes for a solid investment choice.
The company also plans to continue to boost organic growth through expansion in existing markets. It is also focused on expanding its ready-mixed concrete and aggregate products platforms and entering into new major metropolitan areas through acquisitions.
Other Stocks to Consider
A few other top-ranked stocks in the sector include Beazer Homes USA, Inc. (BZH - Free Report) , M/I Homes, Inc. (MHO - Free Report) and KB Home (KBH - Free Report) .
KB Home, a Zacks Rank #2 stock, is expected to witness 51.7% growth in fiscal 2017 earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Beazer and M/I Homes also carry a Zacks Rank #2. Beazer surpassed earnings in two of the past four quarters with an average beat of 103.47%. Full-year 2017 earnings for M/I Homes are likely to rise 37.1%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>