A Hot 5-Star Stock Idea: Cemex

There's an old -- and very appropriate -- investing saw that says, "Tips are for waiters." So I'm not going to bother giving you a stock tip. I do, however, have a stock idea for you.

What's the difference? Well, a stock tip is generally a hush-hush, wink-wink affair where the tipper expects the tip-ee to run out and buy the stock based on the tip alone. A stock idea, on the other hand, is a good starting point, but needs further research before it can become a fully baked investment thesis.

So let's cut the jibber-jabber and get right to today's idea: Cemex (NYSE: CX  ) . The Motley Fool's CAPS community has overwhelmingly recommended this stock, with nearly 4,400 members giving it an outperform rating, versus just 132 who have rated it an underperformer.

To get a better look at how Cemex stacks up, let's take a look at how it compares to similar companies in the construction materials industry:

Company

Net Profit Margin (TTM)

Return on Equity (TTM)

2009 Estimated Price-to-Earnings Ratio

CAPS Rating (out of 5)

Cemex

(1.1%)

(1.5%)

19.4

*****

CRH (NYSE: CRH  )

6.0%

15.6%

12.7

*****

Eagle Materials (NYSE: EXP  )

7.0%

10.0%

24.9

****

Vulcan Materials (NYSE: VMC  )

(1.5%)

(1.3%)

48.4

****

Martin Marietta Materials (NYSE: MLM  )

7.3%

13.2%

21.7

**

Source: CAPS, Yahoo! Finance, and Capital IQ, a division of Standard & Poor's. TTM = trailing 12 months.

Looking at the chart above, we can clearly see that Cemex has struggled a bit more over the past year than some of the other construction-materials companies. Based on analysts' estimates for its full-year income, though, there's a clear expectation that Cemex may bounce back this year. Plus, the company's stock is one of the cheapest of the group, based on forward earnings estimates.

Still, Cemex is burdened by a huge debt load from buying companies during the flush years of the construction boom. That debt is now hanging over Cemex, and the company announced yesterday that it is selling its Australian operations to its chief competitor, Switzerland-based Holcim, for $1.6 billion. It also sold three quarries to Martin Marietta Materials for $65 million.

To get further insight on CAPS members' love affair with Cemex, let's take a look at what CAPS All-Star Vanheezy18 said when giving the stock a thumbs-up back in April:

This is one of those companies that the recession simply makes leaner, stronger, and better positioned to pounce on the market rebound. This company has cut 900 million dollars in costs and optimized its business plan. It might not "pop" for another 9 months (who knows?) but nothing points to this stock losing ground anytime soon....and who are their competitors?

So what do you think? Is this an idea worth pursuing or is Cemex an overrated stock? Head over to CAPS and let the 135,000-member community know what you think. If you're not sold on Cemex, but want to take advantage of the collective intelligence of the CAPS community, fans of Cemex have also been bullish on General Electric (NYSE: GE  ) and Apple (Nasdaq: AAPL  ) .

Further Foolishness:

Cemex and Apple are Motley Fool Stock Advisor picks. Vulcan Materials is an Inside Value selection. Cemex is a Global Gains recommendation, and the Fool owns shares of it. Try any of our Foolish newsletters today, free for 30 days

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy likes its marshmallows golden brown. 


Read/Post Comments (0) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 922174, ~/Articles/ArticleHandler.aspx, 10/24/2014 12:36:54 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement