VMC Vulcan Materials Company
A great local-monopoly franchise, but at 28x NOPAT the price already assumes years of perfect pricing.
The story
Vulcan is the largest US construction aggregates producer. Its moat is local and durable: quarries are nearly impossible to permit, and stone is too heavy to ship far, so each market behaves like a small oligopoly with steady real price increases. The business is mature in volume but still compounds through pricing, infrastructure (IIJA) and Sunbelt demand, plus bolt-on acquisitions. Growth is mid-single-digit, margins are expanding, and capital intensity is high.
Revenue growth of 6% assumes high-single-digit aggregates pricing offset by flat to soft volumes. The 25% target margin reflects continued unit-profit expansion, in line with Martin Marietta, but stays below what pure aggregates would earn. Sales-to-capital is set at 1.1, above the 0.63 trailing figure, because that figure is inflated by acquisitions and land, and organic growth on existing reserves needs much less capital. The 12-year horizon fits a permitted-reserve franchise. These drivers still value the stock well below the market, so the market is pricing in more pricing power than I assume.
Value drivers
| Revenue growth (Y1) | 6.0% |
| Terminal growth | 3.5% |
| Forecast horizon | 12y |
| Target operating margin | 25.0% |
| Years to target margin | 5 |
| Sales-to-capital | 1.10 |
| Beta | 1.00 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.3% |
| Terminal WACC | 9.3% |
Valuation bridge
| PV of explicit FCFF | 11.16B |
| PV of terminal value | 11.05B |
| Equity value | 17.83B |
| ÷ shares → per share | $137.60 |
News
neutral -0.10 · 8 articles
- Reflecting On Building Materials Stocks’ Q2 Earnings: Vulcan Materials (NYSE:VMC)
- 1 Safe-and-Steady Stock to Research Further and 2 We Turn Down
- Billionaire Ray Dalio’s Bridgewater’s 2 Non-AI Stock Picks
- Is Vulcan Materials Stock Underperforming the S&P 500?
- Uber initiated, Thermo Fisher upgraded: Wall Street's top analyst calls
- Here Are Tuesday’s Top Wall Street Analyst Research Calls: Abercrombie & Fitch, Affirm Holdings, Eagle Materials, Klarna Group, Martin Marietta Materials, Oklo, Qualcomm, Robinhood Markets, Ulta Beauty, and More
- Has Vulcan Materials (VMC) Run Too Far Above Fair Value?
- Vulcan (VMC) Up 1% Since Last Earnings Report: Can It Continue?
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 8.60B | 6.0% | 21.3% | 1.43B | 442.68M | 987.67M | 903.74M |
| 2 | 9.10B | 5.8% | 22.3% | 1.58B | 451.47M | 1.13B | 942.86M |
| 3 | 9.60B | 5.5% | 23.2% | 1.73B | 458.73M | 1.27B | 976.49M |
| 4 | 10.11B | 5.3% | 24.1% | 1.90B | 464.32M | 1.43B | 1.00B |
| 5 | 10.63B | 5.1% | 25.0% | 2.07B | 468.12M | 1.60B | 1.03B |
| 6 | 11.15B | 4.9% | 25.0% | 2.17B | 469.99M | 1.70B | 997.90M |
| 7 | 11.66B | 4.6% | 25.0% | 2.27B | 469.82M | 1.80B | 967.23M |
| 8 | 12.18B | 4.4% | 25.0% | 2.37B | 467.50M | 1.90B | 935.37M |
| 9 | 12.69B | 4.2% | 25.0% | 2.47B | 462.95M | 2.01B | 902.51M |
| 10 | 13.19B | 4.0% | 25.0% | 2.57B | 456.10M | 2.11B | 868.82M |
| 11 | 13.68B | 3.7% | 25.0% | 2.66B | 446.89M | 2.22B | 834.48M |
| 12 | 14.16B | 3.5% | 25.0% | 2.76B | 435.28M | 2.32B | 799.68M |
Key risks
- Aggregates volumes stay weak as housing and private nonresidential construction slow, testing pricing power
- Infrastructure spending falls off when IIJA funding expires without a strong reauthorization
- Overpaying for acquisitions keeps returns on capital low and adds debt
Catalysts
- Highway bill reauthorization that keeps public infrastructure funding at multi-year highs
- Sustained double-digit cash gross profit per ton as pricing beats cost inflation