The material and mining industry is one of the largest and most polluting industries in the world, accounting for 10% of the global greenhouse gas emissions. It is also known to be a cyclical industry, implying that the growth of the industry is dependent on the growth of the economy. Macroeconomic factors such as inflation and interest rates are decreasing which is a positive sign for global economies and GDP growth. Hence, the demand and supply of materials is likely to increase due to the expansion of the economy by building more houses, infrastructure, steel manufacturing etc.
The material industry consists of many smaller segments including but not limited to steel, chemicals, agriculture, infrastructure and so forth. For the remainder of the article, a closer look is taken into the opportunity of investing in United States Lime & Minerals inc. (USLM). A segment that is often overlooked but where large gains are to be made. The remainder of the article focuses on the year to date performance of USLM, a company overview, financial ratios and future outlook to determine if USLM is an attractive investment.
YTD performance
United States Lime & Materials (USLM) has been massively outperforming the S&P500 in 2024. Specifically, the year-to-date performance of USLM is 209% while the S&P500 has a YTD return of 27%. The increase in shareprice is thanks to the fact that USLM has been profitable in the last years and continued to invest their earnings in the growth of the company. Ultimately, causing the earnings per share to increase over time. Furthermore, a consistent growth of earnings and revenue is also an indication for investors that the company is likely to continue to growth in the future and investors are pricing in that the earnings will be even higher in the future. Finally, a better macroeconomic outlook with lower inflation and lower interest rates will have a positive effect on the material industry causing many investors to start investing in cyclical industries again.
Company overview
United States Lime & Minerals (USLM) operates in two market segments which are the limestone and oil & gas segment. Offering various products helps USLM to diversify their revenue streams and maintain their strong profit margins. The main segments where USLM operates in is the lime and limestone operations. The manufactured products (quicklime, hydrated lime, lime kilm dust, lime slurry and calcium limestone) are primarily used in construction, steel manufacturing, environment such as water treatment facilities, industrials, oil and gas services as well as agriculture like cattle feed.
USLM further implemented a stock split in 2024 with a ratio of 5:1, meaning that for every share you held, it will now be converted to 5 smaller shares. Noteworthy is that this has no effect on the market cap or valuation of USLM. The reason behind the stock split is to make the shares more attractive and affordable for new investors trying to enter the market and industry.
Key financial ratios
In order to determine the success and justify the growth of USLM, a closer look is taken into the financial ratios of the company. Starting off with the return on equity (ROE) as shown below in table 1. The ROE measures how efficient equity financing can be turned into profits for the company. USLM has done a great job in the past years as the ROE showed a strong upward trend and increased from 11.39% in 2019 to 23.52% in 2024. This is higher than the industry average of 15%, indicating strong capital management of USLM.
Continuing with profitability measurements, the gross margin showed a strong increase from 26.33% in 2019 to an astonishing 43.56% in 2024. This growth reflects USLM’s ability to expand their operations and as a result increase revenue but at the same time control and maintain production costs effectively. Next, the net profit margin tells a similar story where it increased gradually over time and currently sits at 32.59% in 2024. Implying that USLM is becoming more efficient in converting revenue into actual profit which is a strong signal of financial health and operational excellence.
Turning over to the growth rates of USLM. Revenue growth has been volatile but remained positive every year since 2019 with the largest increases in 2022 and onwards. The slow growth in 2019 and 2020 could be caused by the Covid-19 pandemic and lower demand for lime products. Now that the economic outlook is more favorable again, cyclical industries are the ones that benefit the most as demand of these products is likely to increase again. Furthermore, the net income growth has been incredibly strong with growth rates of 64% in 2023 and 44.64% in 2024. This is thanks to keeping costs of revenue stable, low operating expenses and even having non-operating income which further boosts net income.
Finally, let’s look at valuation ratios such as the price to earnings which measures the price per share relative to the earnings per share. The P/E ratio has risen significantly from 19.62 in 2023 to a whopping 31.93 in 2024. This indicates that investors have high expectations that the revenue and earnings of USLM will grow significantly in the future. However, it can also be a sign that the stock is currently overvalued when compared to the average P/E ratio of the materials industry which is currently 16.7. Hence, investors should properly assess if the stock is fairly valued. Furthermore, the Price to book (P/B) ratio measures the market value relative to the book value of the company. As a result, a gradual increase in the P/B ratio of USLM implies that there is more investor confidence in the company’s balance sheet. However, do note that a higher ratio also signals that the stock of USLM is trading at a premium right now. to illustrate, the average P/B ratio of the industry is 1.2.
**Table 1: Financial ratios of USLM **
Future outlook and buying opportunity
United States Limes & Materials (USLM) is expected to continue to grow in the future thanks to their strong financials, favorable macroeconomic conditions and increasing industry demand. As inflation and interest rates decline, the global economy is set for expansion which stimulates growth in cyclical industries like materials and construction. Further, with infrastructure development, industrial manufacturing, and agricultural demand on the rise, USLM is well-positioned to capitalize on these tailwinds thanks to their diversified product portfolio.
To conclude, USLM is a good stock to buy for investors because of the following reasons. First, USLM is well positioned for industry growth thanks to a better macroeconomic outlook. Demand towards infrastructure, construction and industrial materials will increase where USLM can act upon. Second, USLM showed very strong and growing profitability metrics. Specifically, a gross margin of 43.56%, a net profit margin of 32.59% and a ROE of 23.52% in 2024. Hence, USLM demonstrates superior operational efficiency and effective cost management. Third, the steady growth in net income and revenue over the last years further justifies the strong profitability ratios and indicates that the ratios are no outliers. This also shows USLM's ability to efficiently navigate cyclical industry challenges. Finally, with a P/E ratio of 31.93 and trading at a premium price, investors are pricing in that the company is expected to deliver significant returns in the future. Hence, USLM an attractive investment for long-term growth and cyclical investor.
I/we have no positions in any asset mentioned, but may initiate a position over the next 7 days
The material and mining industry is one of the largest and most polluting industries in the world, accounting for 10% of the global greenhouse gas emissions. It is also known to be a cyclical industry, implying that the growth of the industry is dependent on the growth of the economy. Macroeconomic factors such as inflation and interest rates are decreasing which is a positive sign for global economies and GDP growth. Hence, the demand and supply of materials is likely to increase due to the expansion of the economy by building more houses, infrastructure, steel manufacturing etc.
The material industry consists of many smaller segments including but not limited to steel, chemicals, agriculture, infrastructure and so forth. For the remainder of the article, a closer look is taken into the opportunity of investing in United States Lime & Minerals inc. (USLM). A segment that is often overlooked but where large gains are to be made. The remainder of the article focuses on the year to date performance of USLM, a company overview, financial ratios and future outlook to determine if USLM is an attractive investment.
YTD performance
United States Lime & Materials (USLM) has been massively outperforming the S&P500 in 2024. Specifically, the year-to-date performance of USLM is 209% while the S&P500 has a YTD return of 27%. The increase in shareprice is thanks to the fact that USLM has been profitable in the last years and continued to invest their earnings in the growth of the company. Ultimately, causing the earnings per share to increase over time. Furthermore, a consistent growth of earnings and revenue is also an indication for investors that the company is likely to continue to growth in the future and investors are pricing in that the earnings will be even higher in the future. Finally, a better macroeconomic outlook with lower inflation and lower interest rates will have a positive effect on the material industry causing many investors to start investing in cyclical industries again.
Company overview
United States Lime & Minerals (USLM) operates in two market segments which are the limestone and oil & gas segment. Offering various products helps USLM to diversify their revenue streams and maintain their strong profit margins. The main segments where USLM operates in is the lime and limestone operations. The manufactured products (quicklime, hydrated lime, lime kilm dust, lime slurry and calcium limestone) are primarily used in construction, steel manufacturing, environment such as water treatment facilities, industrials, oil and gas services as well as agriculture like cattle feed.
USLM further implemented a stock split in 2024 with a ratio of 5:1, meaning that for every share you held, it will now be converted to 5 smaller shares. Noteworthy is that this has no effect on the market cap or valuation of USLM. The reason behind the stock split is to make the shares more attractive and affordable for new investors trying to enter the market and industry.
Key financial ratios
In order to determine the success and justify the growth of USLM, a closer look is taken into the financial ratios of the company. Starting off with the return on equity (ROE) as shown below in table 1. The ROE measures how efficient equity financing can be turned into profits for the company. USLM has done a great job in the past years as the ROE showed a strong upward trend and increased from 11.39% in 2019 to 23.52% in 2024. This is higher than the industry average of 15%, indicating strong capital management of USLM.
Continuing with profitability measurements, the gross margin showed a strong increase from 26.33% in 2019 to an astonishing 43.56% in 2024. This growth reflects USLM’s ability to expand their operations and as a result increase revenue but at the same time control and maintain production costs effectively. Next, the net profit margin tells a similar story where it increased gradually over time and currently sits at 32.59% in 2024. Implying that USLM is becoming more efficient in converting revenue into actual profit which is a strong signal of financial health and operational excellence.
Turning over to the growth rates of USLM. Revenue growth has been volatile but remained positive every year since 2019 with the largest increases in 2022 and onwards. The slow growth in 2019 and 2020 could be caused by the Covid-19 pandemic and lower demand for lime products. Now that the economic outlook is more favorable again, cyclical industries are the ones that benefit the most as demand of these products is likely to increase again. Furthermore, the net income growth has been incredibly strong with growth rates of 64% in 2023 and 44.64% in 2024. This is thanks to keeping costs of revenue stable, low operating expenses and even having non-operating income which further boosts net income.
Finally, let’s look at valuation ratios such as the price to earnings which measures the price per share relative to the earnings per share. The P/E ratio has risen significantly from 19.62 in 2023 to a whopping 31.93 in 2024. This indicates that investors have high expectations that the revenue and earnings of USLM will grow significantly in the future. However, it can also be a sign that the stock is currently overvalued when compared to the average P/E ratio of the materials industry which is currently 16.7. Hence, investors should properly assess if the stock is fairly valued. Furthermore, the Price to book (P/B) ratio measures the market value relative to the book value of the company. As a result, a gradual increase in the P/B ratio of USLM implies that there is more investor confidence in the company’s balance sheet. However, do note that a higher ratio also signals that the stock of USLM is trading at a premium right now. to illustrate, the average P/B ratio of the industry is 1.2.
**Table 1: Financial ratios of USLM **
Future outlook and buying opportunity
United States Limes & Materials (USLM) is expected to continue to grow in the future thanks to their strong financials, favorable macroeconomic conditions and increasing industry demand. As inflation and interest rates decline, the global economy is set for expansion which stimulates growth in cyclical industries like materials and construction. Further, with infrastructure development, industrial manufacturing, and agricultural demand on the rise, USLM is well-positioned to capitalize on these tailwinds thanks to their diversified product portfolio.
To conclude, USLM is a good stock to buy for investors because of the following reasons. First, USLM is well positioned for industry growth thanks to a better macroeconomic outlook. Demand towards infrastructure, construction and industrial materials will increase where USLM can act upon. Second, USLM showed very strong and growing profitability metrics. Specifically, a gross margin of 43.56%, a net profit margin of 32.59% and a ROE of 23.52% in 2024. Hence, USLM demonstrates superior operational efficiency and effective cost management. Third, the steady growth in net income and revenue over the last years further justifies the strong profitability ratios and indicates that the ratios are no outliers. This also shows USLM's ability to efficiently navigate cyclical industry challenges. Finally, with a P/E ratio of 31.93 and trading at a premium price, investors are pricing in that the company is expected to deliver significant returns in the future. Hence, USLM an attractive investment for long-term growth and cyclical investor.
I/we have no positions in any asset mentioned, but may initiate a position over the next 7 days