CRH (NYSE:CRH): Assessing Valuation After Strong Q2 Earnings and Upgraded Full-Year EBITDA Guidance

CRH (NYSE:CRH) just delivered an earnings update that caught investors attention, lifting full year EBITDA guidance after a strong second quarter that held up well despite tough weather and a softer U.S. housing backdrop.

See our latest analysis for CRH.

That upgrade is landing against a backdrop of strong momentum, with a 1 month share price return of 15.83 percent and a year to date share price gain of 36.9 percent. The 3 year total shareholder return of 237.3 percent shows how powerful the longer term compounding has been.

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But after such strong gains and upgraded guidance, is CRH still trading at a meaningful discount to its fundamentals, or have investors already priced in the next leg of growth, leaving limited upside from here?

Most Popular Narrative: 5.8% Undervalued

With CRH last closing at $126.92 against an estimated fair value of about $134.79, the most followed narrative sees modest upside still on the table.

The ongoing rollout of U.S. federal infrastructure funding (less than 40% of the IIJA highway funds have been spent) and an encouraging outlook for the next highway bill create a substantial, multi year runway for demand in CRH's core public infrastructure segments, offering the prospect for sustained revenue growth and backlog visibility.

Read the complete narrative.

Curious how steady, mid single digit growth, rising margins, buybacks and a richer earnings multiple combine into that valuation story? The full narrative connects every dot.

Result: Fair Value of $134.79 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that upside story could be derailed by weaker U.S. infrastructure funding or by integration missteps on larger deals such as Eco Material or a potential NCC acquisition.

Find out about the key risks to this CRH narrative.

Another View: DCF Flags Overvaluation

Our DCF model paints a more cautious picture, putting fair value for CRH closer to $102.42, below the current $126.92 share price. That implies the stock may be trading ahead of its cash flow fundamentals, raising the question: are investors leaning too hard into the growth story?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CRH for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 910 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own CRH Narrative

If you see the story differently or want to stress test the numbers yourself, you can build a personalized view in just a few minutes: Do it your way.

A great starting point for your CRH research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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