Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Construction Materials industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Construction Materials Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Construction Materials Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Construction Materials industry for Thursday, March 14, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Construction Materials industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Holcim AG (ADR)’s Value Grade

Value Grade:

Holcim AG is a Switzerland-based company operating in building materials industry. The Company's business segments include Cement, Aggregates, Ready-Mix Concrete and Solutions & Products. Cements division is engaged in sustainable cements and hydraulic binders. Aggregates segment focuses on manufacturing aggregate that is used as raw materials for concrete, masonry, and asphalt as well as base materials for roads, landfills, and buildings. Ready-Mix Concrete includes ready-mix concrete products, self-filling and self-leveling concrete, architectural concrete, insulating concrete and pervious concrete. Solutions & Products offers precast and concrete products for specialty buildings and roofing solutions. The Segment offers also mortars for 3D printing construction.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Holcim AG (ADR) has a Value Score of 68, which is considered to be undervalued.

When you look at Holcim AG (ADR)’s price-to-sales ratio at 1.61 compared to the industry median at 1.96, this company has a lower price relative to revenue compared to its peers. This could make Holcim AG (ADR)’s stock more attractive for value investors.

Holcim AG (ADR)’s price-earnings ratio is 14.45 compared to the industry median at 19.44. This means it has a lower share price relative to earnings compared to its peers. This could make Holcim AG (ADR) more attractive for value investors.

Now, let’s assess Holcim AG (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 7.3, when compared to the industry median of 9.9, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Holcim AG (ADR)’s shareholder yield is higher than its industry median ratio of 3.77%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Holcim AG (ADR)’s price-to-book ratio is lower than its industry median ratio of 3.02. This could make Holcim AG (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Holcim AG (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Holcim AG (ADR)’s price-to-free-cash-flow ratio is lower than its industry median ratio of 27.61. This could make Holcim AG (ADR) more attractive because the lower P/FCF ratio indicates that Holcim AG (ADR) is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Monarch Cement Co’s Value Grade

Value Grade:

The Monarch Cement Company is engaged in the manufacture and sale of Portland cement. The Company markets its products in various areas, including the State of Kansas, the State of Iowa, southeast Nebraska, western Missouri, northwest Arkansas and northern Oklahoma. Its products are sold to contractors, ready-mixed concrete plants, concrete products plants, building materials dealers and governmental agencies. Its cement is delivered either in bulk or in paper bags and is sold under the MONARCH brand name. The cement is distributed both by truck and rail, either common or private carrier. Its subsidiaries sell ready-mixed concrete, concrete products and sundry building materials in the primary market. It groups its operations into two lines of business, including Cement Business and Ready-Mixed Concrete Business. Its subsidiaries include American Concrete Company, Inc., Beaver Lake Concrete, Inc., Capitol Concrete Products Co., Inc., City Wide Construction Products Co. and others.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Monarch Cement Co has a Value Score of 66, which is considered to be undervalued.

Monarch Cement Co’s price-earnings ratio is 9.9 compared to the industry median at 19.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Monarch Cement Co more attractive for value investors.

Monarch Cement Co’s price-to-book ratio is higher than its peers. This could make Monarch Cement Co less attractive for value investors when compared to the industry median at 3.02.

You can read more about Monarch Cement Co’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Smart Sand Inc’s Value Grade

Value Grade:

Smart Sand, Inc. is a fully integrated frac and industrial sand supply and services company. The Company offers complete mine to wellsite proppant supply and logistics solutions to its frac sand customers. The Company produces Northern White sand, which is a sand used as proppant used to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications. It also offers proppant logistics solutions to its customers through its in-basin transloading terminals and its SmartSystems well-site proppant storage capabilities. Through its SmartSystems wellsite proppant storage solutions, it offers the SmartDepot and SmartDepotXL silo systems, SmartPath transloader, and its rapid deployment trailers. Its SmartDepot silos include passive and active dust suppression technology, along with the capability of a gravity-fed operation. Its SmartPath transloader is a mobile sand transloading system.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Smart Sand Inc has a Value Score of 99, which is considered to be undervalued.

Smart Sand Inc’s price-earnings ratio is 5.9 compared to the industry median at 19.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Smart Sand Inc more attractive for value investors.

Smart Sand Inc’s price-to-book ratio is higher than its peers. This could make Smart Sand Inc less attractive for value investors when compared to the industry median at 3.02.

You can read more about Smart Sand Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Construction Materials Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Construction Materials stocks as well as other industrys.

Choosing Which of the 3 Best Construction Materials Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Holcim AG (ADR) stock has a Value Grade of B.
• Monarch Cement Co stock has a Value Grade of B.
• Smart Sand Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 undervalued stocks in the Construction Materials industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Construction Materials Stocks

Want to learn more about Construction Materials stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Construction Materials Stocks for Thursday, March 14
• 3 Undervalued Construction Materials Stocks for Wednesday, March 13
• 3 Undervalued Construction Materials Stocks for Monday, March 11
• Which Is a Better Investment, Atlas Energy Solutions Inc or Summit Materials Inc Stock?

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.