Trex: Buy Rating on Cyclical Recovery, Margin Expansion, and Compelling Valuation Upside Into 2027

UBS analyst John Lovallo upgraded the rating on Trex Company to a Buy today, setting a price target of $52.00.

John Lovallo has given his Buy rating due to a combination of factors tied to Trex’s growth outlook, margins, and valuation. He forecasts that after several years of subpar performance driven by pandemic disruptions and weak consumer sentiment, Trex will reaccelerate to high single‑digit revenue growth by 2027, supported by a recovering repair-and-remodel market, continued conversion from wood to composite decking, and a meaningful ramp in the company’s railing business. Although 2026 is expected to carry temporary headwinds from higher SG&A spending, increased depreciation at the Little Rock facility, and an unfavorable railing mix, he believes the company is positioned to expand margins again from 2027 onward, with current estimates likely conservative. Evidence of improving renovation activity and a firming margin profile during 2026 is expected to act as a catalyst for the shares.

Lovallo also emphasizes that Trex’s current valuation is compelling relative to its history and quality. The stock is trading at an enterprise value to next‑twelve‑month EBITDA multiple materially below its long‑term average, which he sees as an attractive entry point into a leading building products franchise. He modestly raises his price target to $52, implying roughly 45% upside from the prevailing share price, based on a 16x multiple of his 2027 adjusted EBITDA forecast. In his view, the recent pullback has reset expectations, de‑risked the outlook on both growth and margins, and created a favorable risk‑reward setup for investors willing to look beyond the near‑term noise into 2026 and the subsequent recovery period.

Based on the recent corporate insider activity of 48 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of TREX in relation to earlier this year.