It hasn't been a great afternoon session for CRH investors, who have watched their shares sink by -1.4% to a price of $83.4. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
The Market May Be Undervaluing CRH's Assets and Equity:
CRH plc, together with its subsidiaries, provides building materials solutions in Ireland and internationally. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 22.19 and an average price to book (P/B) ratio of 4.06. In contrast, CRH has a trailing 12 month P/E ratio of 19.3 and a P/B ratio of 2.77.
P/E rations can be placed into context by dividing them by the firm's expected 5-year EPS growth rate, which gives us its Price to Earnings Growth (PEG) ratio. CRH's PEG ratio is 1.18, which tells us the company is fairly valued in terms of growth. PEG ratios under 1 are considered an indicator of undervalued growth, but we need to keep in mind that many successful companies with excellent share performance have maintained much higher PEG ratios.
As always, a quantitative approach to a stock should be supplemented with a look at qualitative factors, such as the competence of its management team, quality of its corporate culture, and the wide variety of social and economic factors that can impact the success of its product.
Wider Gross Margins Than the Industry Average of 29.45%:
| 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|
| Revenue (M) | $27,449 | $28,132 | $25,888 | $29,206 | $32,723 |
| Gross Margins | 33% | 33% | 33% | 34% | 33% |
| Net Margins | 11% | 6% | 5% | 9% | 12% |
| Net Income (M) | $2,889 | $1,738 | $1,165 | $2,621 | $3,874 |
| Diluted Shares (M) | 843 | 800 | 795 | 774 | 752 |
| Earnings Per Share | $3.43 | $2.17 | $141.8 | $3.26 | $5.03 |
| EPS Growth | n/a | -36.73% | 6434.56% | -97.7% | 54.29% |
| Free Cash Flow (M) | $2,246 | $3,881 | $3,938 | $4,210 | $3,954 |
| Total Debt (M) | $9,959 | $9,211 | $10,958 | $9,938 | $8,145 |
| Current Ratio | 1.29 | 1.34 | 2.01 | 1.85 | 1.67 |
CRH has generally positive cash flows and wider gross margins than its peer group. Additionally, the company's financial statements display positive EPS growth and a decent current ratio of 1.67.
