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
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 |
6.0% |
15.6% |
12.7 |
***** |
|
Eagle Materials |
7.0% |
10.0% |
24.9 |
**** |
|
Vulcan Materials |
(1.5%) |
(1.3%) |
48.4 |
**** |
|
Martin Marietta Materials |
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
Further Foolishness:
