Investor/An insider's guide to the market: CRH is the Republic's largest building materials company and is the largest quoted industrial stock on the Irish Stock Exchange, with a market capitalisation of €10 billion.

Up until the early 1980s, the Irish market accounted for the lion's share of CRH's business. However, a brilliantly executed acquisition strategy over the past three decades leaves the Irish operations accounting for only 11 per cent of groupwide operating profits.

This does not imply that the Irish arm of the company has been neglected. On the contrary, the Irish operations have grown strongly and, over the past decade, have participated in the Celtic Tiger era.

Nevertheless, the company's policy of acquiring new businesses overseas in both good times and bad has enabled it to become a leading player in its international sector.

As a result, North America accounts for 47 per cent of operating profit with continental Europe and the UK combined accounting for 42 per cent.

CRH's successful acquisition strategy over such a long period means that it has leapfrogged over its UK rivals in terms of market capitalisation.

For example, Wolseley is capitalised at just over €8 billion whilst RMC has a capitalisation of less than €3 billion.

CRH's main continental European rivals are a little larger with Lafarge capitalised at more than €12 billion and Saint Gobain with a market capitalisation of just under €15 billion.

Producing and distributing cement and related building materials products is a cyclical industry.

CRH has sought to balance the inherent cyclicality of its business by diversifying geographically. This approach has succeeded as the group has managed to grow its earnings and dividends even through economic downturns.

The performance of the company through the 2001/2002 slowdown is testimony to the benefits of this geographical diversification. During this period CRH's European operations were hard hit but the US and Irish operations held up and were able to compensate.

Despite successfully managing the underlying business through the downturn, the shares did fall sharply during the bear market.

In the middle of 2001, the shares traded above €20 but had fallen to as low as €12 by January 2003. The shares participated in the market recovery that began in spring 2003 and have, in fact, outperformed the ISEQ Overall index during 2004.

So far this year, the shares have risen by 19 per cent, thus comfortably outperforming the ISEQ index by 5 per cent. A big proportion of this gain occurred during the third quarter as the market reacted favourably to an upbeat trading update and the subsequent release of very good financial results for the first half of the year.

The key question now is whether the CRH share price can continue to appreciate in coming months after such a strong recent performance. Investor takes the view that they can and, therefore, would rate the shares as a buy for three key reasons:

CRH's existing operations should continue to benefit from an ongoing cyclical recovery.

The steady stream of past and prospective acquisitions offers the potential for further upside in sales and earnings.

A 17 per cent hike in the interim dividend sends a very positive signal to investors.

Over the 2001-2003 period, several of CRH's businesses stagnated in line with tough overall market conditions. Despite this, CRH still managed to deliver modest growth in earnings per share (EPS) due to the positive impact of acquisitions.

Business conditions improved markedly in the second half of 2003 and CRH's 2004 first-half results confirmed that this recovery had become firmly based. Continental Europe was extremely strong, with sales rising by 48 per cent to €2.3 billion.

This growth rate is flattered by a very weak comparable period in 2003. Nevertheless, there was a strong improvement in several markets, with Poland and Finland particularly buoyant.

Furthermore, the successful integration of the Dutch Cementbouw acquisition made a major contribution to CRH's sales and profits.

During the first half of 2004, CRH spent €700 million on acquisitions in Europe and North America. The company has a strong balance sheet and generates very strong cashflow.

It is, therefore, well positioned to continue to acquire a steady stream of bolt-on acquisitions. It is also sufficiently strong financially to take advantage of any suitable large-scale acquisitions that become available.

With CRH now firing on all cylinders, the company seems well capable of delivering double-digit percentage growth in earnings per share over the next two to three years.

Based on forecast 2004 earnings, the shares are trading on a price/earnings ratio of only 12, which implies that the shares still offer very attractive investment value.

A dividend yield of only 1.6 per cent is a little low but this dividend is set to grow by upwards of 15 per cent per annum over the medium term.

After such a strong recent run, the shares may mark time in the short term but they still offer ample upside potential over the medium term.