Company Profile: U.S. Concrete Inc (RMIX) (obtained via Yahoo Finance)
U.S. Concrete, Inc. produces and sells ready-mixed concrete, precast concrete products, and concrete-related products in select markets in the United States. It operates in two segments, Ready-Mixed Concrete and Concrete-Related Products, and Precast Concrete Products. Ready-Mixed Concrete and Concrete-Related Products segment engages in the formulation, preparation, and delivery of ready-mixed concrete to the job sites of its customers, as well as provides services, including the formulation of mixtures for specific design uses, onsite and lab-based product quality control, and customized delivery programs. This segment also involves in the mining and sale of aggregates; and the resale of building materials primarily to its ready-mixed concrete customers. Its products include ready-mixed concrete; stone, sand, and gravel aggregates; building materials, such as rebar concrete block, wire mesh, color additives, curing compounds, grouts, and wooden forms; concrete masonry; and other products and tools used in the construction industry. Precast Concrete Products segment engages in the production, distribution, and sale of precast concrete products. This segment also offers precast concrete structures, such as utility vaults, manholes and other wastewater management products, specialty engineered structures, curb-inlets, catch basins, retaining and other wall systems, custom designed architectural products, and other precast concrete products. The company principally operates in Texas, California, New Jersey, and Michigan. Its customers include commercial and industrial construction contractors, residential construction contractors, street and highway construction contractors, and other public works and infrastructure contractors. The company was founded in 1948 and is based in Houston, Texas.
1) Is the business simple and understandable?
This stock is in an industry with a healthy number of competitors, and looking at its sales, it is one of the smaller players. However, the business in which the company operates is simple and understandable which helps investors make financial decisions on regards of the suitability with their investment goals. Additionally, U.S. Concrete formulates, prepares, and delivers ready-mixed concrete to its customers’ job sites. This companyâ€™s products consist of proportioned mixes that it prepares and delivers in unhardened plastic states for placement and shipping into their desired forms.
2) Does the business have a consistent operating history?
This stock is in the building materials industry, which has proven to be an excellent industry over the trailing 5- and 10-year periods. Compared to other stocks in its industry, though, its five-year returns have been similar to the average. Persistent strength or weakness, however, may very well say something about the structure of an industry or quality of a company’s management. Most companies in the building materials industry have generated very low returns on assets over the past five years. Hence, this company has posted some of its industry’s worst returns on assets. Note also that the company has had very low profit margins, another key profitability measure.
3) Does the business have favorable long term prospects?
Most stocks in the building materials industry have seen steadily growing revenue and impressive earnings growth over the past three years. This stock has also seen steady revenue growth over the past three years. RMIX’s forward earnings yield of 3.79% is the annual return it would generate if its profits remained fixed and it paid out all of its earnings as dividends. Not only is this much lower than the earnings yields of other stocks in its industry, it is also low in absolute terms. Therefore, for this company to generate decent returns for investors, it will have to realize considerable growth in earnings or a higher valuation by the market.
4) Is management rational?
Most of the executive officers and directors of this company have been in the concrete industry for most of their lives. Even though, the company counts with a high level of expertise on its industry, the company has not been wisely run by their management. In addition, the company does not pay dividends and has reinvested their capital for big losses, thus we do not consider RMIX to be rational with their shareholders.
5) Is management candid with its shareholders?
On the investor relations companyâ€™s website, RMIX only states the latest news and releases. Then, after taking a quick look at some of their competitorâ€™s investor site; U.S. Concrete Inc. lacks more information related to the performance of the company in the market.
Financial and Value Review
1) Size of firm
This company is Small-Cap. â€œFailâ€.
2) Strong financial condition
RMIX current ratio is lower than 2. â€œFailâ€.
3) Earnings stability
This company does not have positive net income for the prior 10 years. â€œFailâ€.
4) Dividend record
For the past 10 years the company has not constantly paid dividends. â€œFailâ€.
5) Earnings growth
RMIXâ€™s earning growth has not been enough to one-third in EPS for the past 10 years. â€œFailâ€
6) Price to earnings analysis
The PE ratio is lower than 20. â€œPassâ€
7) Price to assets analysis
The PB and PB*PE ratios are lower than 2.5 and 30 respectively. â€œPassâ€/â€Passâ€.
Having passed 3 out of the 8 required defensive investorâ€™s tests; we will not include U.S. Concrete Inc as been suitable for the defensive investor.
1) Strong financial condition
This company current ratio is higher than 1.5 and its debt to NCA is lower than 1.1. â€œPassâ€/â€Failâ€.
2) Earnings stability
RMIX has not consistently maintained a positive net income for the past 5 years. â€œFailâ€
3) Dividend record
They do not currently pay dividends. â€œFailâ€
4) Earnings growth
The earning growth has not been greater than 5 years ago. â€œFailâ€
This companyâ€™s price is higher than 150% net tangible assets. â€œFailâ€
Having fail most of the Enterprising tests, we feel that U.S. Concrete Inc. does not fall within the acceptable level for Enterprising Investors.
Our valuation model finds a fair value to be around $4.14
Since the company is currently trading at about $4.56, we feel it is currently overvalued and that it may not be a suitable stock for either the defensive or enterprising investor.