Martin Marietta Materials has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 8.1% to $651.10 per share while the index has gained 10%.

Is there a buying opportunity in Martin Marietta Materials, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

We're cautious about Martin Marietta Materials. Here are three reasons we avoid MLM and a stock we'd rather own.

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Martin Marietta Materials’s 7.4% annualized revenue growth over the last five years was mediocre. This was below our standard for the industrials sector.

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Martin Marietta Materials’s revenue to rise by 5.5%. While this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Martin Marietta Materials’s EPS grew at a weak 3.9% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its flat revenue and tells us management responded to softer demand by adapting its cost structure.

Martin Marietta Materials isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 30.6× forward P/E (or $651.10 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at a top digital advertising platform riding the creator economy.

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