Saddled With Investor Worries, Cemex Deserves Another Look

I’ve come across a lot of reasons not to invest in Cemex (CX), the Mexico-based global cement company. Some say the company is too complex, others that it has pursued global expansion irrespective of value, and still others that there’s just too much risk in its “value over volume” approach, particularly recently in Mexico.

I’d never argue that Cemex is a flawless investment candidate, but I’d argue the stock’s underperformance relative to peers like Martin Marietta (MLM), Eagle (EXP), LafargeHolcim (OTCPK:HCMLY), and Buzzi (OTCPK:BZZUY) is overdone. Not only is Cemex making significant strides in deleveraging, I believe there is more operating progress than commonly thought, as well as better prospects in its core Mexico and U.S. markets.

Although using free cash flow modeling for a company like Cemex is very tricky, I believe EV/EBITDA is less desirable given the importance of “I” (interest expense) as well as the fact that such a one-year metric doesn’t reward the progress I believe is to come.

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Saddled With Investor Worries, Cemex Deserves Another Look