CRH Stock Jumps. The Building Materials Company Sees ‘Unrivaled Growth Opportunities.’

CRH plans to grow sales between 7% and 9% a year on average. (Courtesy CRH)

Key Points

• CRH stock rose 4.6% to $119.90 after the company announced new five-year growth targets.
• CRH aims for 7% to 9% annual sales growth, 22% to 24% Ebitda profit margins, and 100% free cash flow conversion.
• The company has $40 billion in financial capacity for growth over the next five years, combining cash and debt financing.

Shares of construction company CRH rose Tuesday as the company prepares for what it called its “next era of growth.”

CRH stock added 4.6%, closing at $119.90, while the S&P 500 gained 0.4% and the Dow Jones Industrial Average rose 0.2%.

The move came after CRH set out new five-year targets at an investor day in New York. The company plans to grow sales between 7% and 9% a year on average, achieve earnings before interest, taxes, depreciation, and amortization, or Ebitda, profit margins of 22% to 24%, and convert 100% of its earnings into free cash flow.

Wall Street projects sales growth of about 5% for the coming few years. Analysts expect Ebitda profit margins to get to almost 22% from about 20% in 2025.

CRH is one of the largest building-materials companies in the world. It produces aggregates—the rocks used to make concrete—as well as cement, asphalt, and other construction-related products that it sells in Europe and the U.S. It also builds roads.

“Our Investor Day will showcase how we are raising our ambition to 2030 to deliver the next era of growth and why we are the leading compounder of capital and shareholder value in our industry,” said CEO Jim Mintern in a news release. “With $40 billion of financial capacity over the next five years, our superior strategy, enabled by our unmatched scale and connected portfolio, positions us to execute on unrivaled growth opportunities.”

That capacity is a combination of “anticipated cash and debt financing available” after spending to maintain the business. It’s the capital available to grow. Historically, CRH has grown by investing in its business and through mergers and acquisitions.

Sales have grown at about 6% a year on average for the past few years. The outlook looks about as bright as that recent history.

Shares trade for about 19 times estimated 2026 earnings, up from a historic price/earnings ratio of closer to 14 times. The stock is more expensive than it once was, but it still trades at a discount to the S&P 500’s 22 times multiple. That isn’t a stretched valuation if the company can produce double-digit earnings growth between now and the end of the decade.

Write to Al Root at allen.root@dowjones.com