Construction & Building Materials: Beta, Multiples & WACC by Sector

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What the numbers say.

The construction sector has shifted a bit this month. It is valued a touch lower than a month ago: the median EV/EBIT edged down to 9.8x while companies moved both ways, the beta rose to 0.97, and the cost of capital stands at 9.2 %. The sector is more unsettled than in September: the choice of peers and settings moves the value more than it did.

EV/EBIT is the multiple to use

It is the tightest of the multiples the fundamentals explain, a dispersion of 21 % across the 20 companies, and the companies are comparable in growth and ROCE. EV/Sales spreads by 42 % because it carries the margin differences with it.

The beta to use: 2 years, daily, 0.97

Among the stable settings it has the tightest spread across the 20 companies; R² 30 %, all 20 betas significant, less liquid group (median bid-ask spread 0.32 %). The smartZebra standard setting, 5 years monthly, has a dispersion of 24 %. The settings alone move the median beta from 0.77 to 1.04.

The choices weigh little

Ten of the twenty companies move the EV/EBIT median by −11 % to +23 %, the settings by up to 24 %. Construction sits in the relaxed corner of the map.

EBITDA margin is not what the market pays for this month

The usual yardsticks for construction: EBITDA margin and ROCE. EBITDA margin: rejected (rank correlation −0.04 with EV/EBITDA (NTM)). ROCE: rejected (rank correlation −0.19 with EV/EBIT (NTM)). Instead, expected growth explains more of EV/EBITDA (rank correlation +0.50). Median EV/EBITDA (NTM) by sub-group: building materials & products 10.0x, construction, engineering & concessions 5.4x.

EV/EBIT (NTM): median 10.1x → 9.8x

10 more expensive · 9 cheaper

Kingspan Group fell most (−10 %), Buzzi Spa rose most (+7 %).

{"m":[["Geberit","22.9","23.9","+5%"],["NIBE Industrier","18.9","18.9","±0%"],["Assa Abloy","16.3","17.3","+6%"],["Kingspan Group","15.8","14.2","−10%"],["Hochtief","14.4","13.4","−7%"],["Skanska","12.2","12.8","+5%"],["Holcim","11.8","12.1","+2%"],["Balfour Beatty","11.9","11.0","−7%"],["DEME Group","10.9","10.6","−2%"],["Actividades de Construccion y Servicios","10.1","9.8","−3%"],["FCC (Fomento de Construcciones)","8.8","9.1","+3%"],["Barratt Redrow","9.3","8.9","−4%"],["Bouygues","8.8","8.8","±0%"],["Heidelberg Materials","8.2","8.6","+5%"],["Compagnie de Saint-Gobain","8.3","8.4","+1%"],["Vinci","8.0","8.2","+3%"],["Eiffage","7.3","7.3","±0%"],["Buzzi Spa","6.7","7.2","+7%"],["Strabag","6.5","6.1","−6%"]],"b":[["Strabag","1.72","1.79",57],["Buzzi Spa","1.46","1.47",57],["Rockwool","1.26","1.27",82],["Hochtief","1.23","1.26",65],["Balfour Beatty","1.12","1.16",88],["Compagnie de Saint-Gobain","1.12","1.13",90],["Heidelberg Materials","1.09","1.09",80],["Skanska","1.08","1.08",91],["Kingspan Group","0.99","1.03",59],["Actividades de Construccion y Servicios","0.98","1.01",82],["Holcim","0.92","0.92",86],["Assa Abloy","0.89","0.89",95],["NIBE Industrier","0.88","0.87",80],["Barratt Redrow","0.81","0.83",79],["DEME Group","0.79","0.80",46],["Vinci","0.62","0.62",81],["Geberit","0.59","0.59",84],["Bouygues","0.43","0.43",66],["Eiffage","0.41","0.41",80],["FCC (Fomento de Construcciones)","0.38","0.39",36]],"w":["FCC (Fomento de Construcciones)","DEME Group","Strabag","Buzzi Spa","Kingspan Group"]}

Beta (2 years, daily): median 0.95 → 0.97

20 of 20 significant

Each line runs from last month’s beta (light dot) to this month’s (blue dot), on the same beta setting.

Do the usual yardsticks hold this month?

The usual yardsticks for construction, tested on the 20 companies this month.

EBITDA margin

Rejected

Rank correlation −0.04 with EV/EBITDA (NTM) · clear link from +0.60

ROCE

Rejected

Rank correlation −0.19 with EV/EBIT (NTM) · clear link from +0.60

Position on the sector map

This sector in gold, the other 19 sectors in blue. Dashed lines at 40 pp are illustrative.

Construction

Chemicals

Utilities

158

Telecom

Media

Travel & Leisure

Retail

Luxury

Consumer Goods

Logistics

Business Serv.

Aero & Defence

Electrical Eq.

Medtech

Pharma

IT Services

Semiconductors

Software

Automotive

Machinery

Construction

How much the choices move the result

Beta and fit

R² (median)

30 %

Significant betas

20 of 20

Median bid-ask spread

0.32 %

Beta range across settings

0.77–1.04

What moves the value?

Change vs. prior month

−3 % vs. September

Peer impact on the median

−11 % to +23 %

Spread from peer choice (pp)

Spread from beta settings (pp)

Position on the sector map

Relaxed

Cost of capital

Cost of equity (CAPM)

“kE = rf + β · MRP”

rf = base rate, MRP = market risk premium, β = sector median beta.

WACC

“WACC = E/(D+E) · kE + D/(D+E) · kD · (1 − t)”

kD = base rate + credit spread; t = peer-average tax rate.

Tax rate

“t = average tax rate of the 20 peers”

Shown above as Tax rate (%).

Selection rules

Best-fit multiple

“lowest dispersion across the 20 companies”

The reference multiple is used only as a fallback.

Beta setting

“tightest spread among stable settings”

Replaces 5y monthly only if it passes the two-month rule.

Status

“|Δ value| ≤ 1 % and |Δ β| ≤ 0.03 → stable”

Up to ±5 % / ±0.06 → shifted a bit; beyond → shifted noticeably.

Scope

The 20 largest European listed companies by market value with core business in building materials, construction and engineering, building products and homebuilders; primary listing on a European exchange; banks, insurers, financial services and real estate are excluded.