Even though Vulcan Materials’s stock has taken a 5.7% hit over the past six months (it currently trades at $224.51 per share), it’s still beating the S&P 500 by 8.5 percentage points.

Is now the time to buy Vulcan Materials, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why VMC doesn't excite us and a stock we'd rather own.

Why Is Vulcan Materials Not Exciting?

Founded in 1909, Vulcan Materials (NYSE:VMC) is a producer of construction aggregates, primarily crushed stone, sand, and gravel.

1. Revenue Growth Flatlining

We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Vulcan Materials’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

2. Decline in Tons Shipped Points to Weak Demand

Revenue growth can be broken down into changes in price and volume (for companies like Vulcan Materials, our preferred volume metric is tons shipped). While both are important, the latter is the most critical to analyze because prices have a ceiling.

Vulcan Materials’s tons shipped came in at 53.9 million in the latest quarter, and over the last two years, averaged 3.5% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Vulcan Materials might have to lower prices or invest in product improvements to grow, factors that can hinder near-term profitability.

3. Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Vulcan Materials’s margin dropped by 3.7 percentage points over the last five years. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. If the longer-term trend returns, it could signal increasing investment needs and capital intensity. Vulcan Materials’s free cash flow margin for the trailing 12 months was 10.9%.

Final Judgment

Vulcan Materials’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 25.7× forward price-to-earnings (or $224.51 per share). This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere. We’d suggest looking at the most dominant software business in the world.

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