Rating Change #5
Eagle Materials Inc (EXP) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 13.7%. Since the same quarter one year prior, revenues rose by 22.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- EAGLE MATERIALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, EAGLE MATERIALS INC increased its bottom line by earning $0.43 versus $0.33 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $0.43).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Construction Materials industry. The net income increased by 183.3% when compared to the same quarter one year prior, rising from -$10.80 million to $9.00 million.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- The current debt-to-equity ratio, 0.56, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
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