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Trex Company (TREX)
:TREX
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Trex Company
(NYSE:TREX)
65Neutral
Positive Factors
Financial Performance
Trex reported strong 4Q24 results with revenue, EBITDA, and EPS all coming in well above Street estimates.
Growth Potential
Trex is the number one brand in the composite decking space, which has an ongoing material conversion story that should lead to faster than market growth in the years ahead.
Negative Factors
Market Risks
While the entry-level market is stabilizing, there are still risks that remain.
Revenue Decline
Guidance outlined a meaningful 1Q25 revenue decline due in large part to smaller channel inventory builds.
Trex Company (TREX) vs. S&P 500 (SPY)
Market Cap
$5.89B
Dividend YieldN/A
Average Volume (3M)2.10M
Price to Earnings (P/E)26.4
Beta (1Y)1.40
Revenue Growth5.17%
EPS Growth10.39%
CountryUS
Employees1,838
SectorIndustrials
Sector Strength70
IndustryConstruction
Share Statistics
EPS (TTM)2.08
Shares Outstanding107,219,920
10 Day Avg. Volume2,148,000
30 Day Avg. Volume2,095,812
Financial Highlights & Ratios
PEG Ratio2.54
Price to Book (P/B)N/A
Price to Sales (P/S)5.53
Price to Cash Flow (P/CF)-187.90
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$71.17Price Target Upside29.52% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering14
Trex Company Business Overview & Revenue Model
Company DescriptionTrex Company, Inc. is a leading manufacturer of wood-alternative decking, railing, and other outdoor products. Operating primarily in the building materials sector, Trex is renowned for its eco-friendly and durable composite materials, which are designed to provide high-performance and low-maintenance outdoor living solutions. The company caters to both residential and commercial markets, offering a wide range of products that enhance the aesthetics and functionality of outdoor spaces.
How the Company Makes MoneyTrex Company generates revenue primarily through the manufacturing and sale of its composite decking and railing products. The company's revenue streams include direct sales to retailers and distributors, who then sell these products to end consumers, as well as direct sales to professional contractors and builders. Significant partnerships with home improvement retailers like Home Depot and Lowe's also contribute to its earnings by expanding its market reach. Additionally, Trex benefits from its focus on sustainability, as its products are made from recycled materials, which appeals to environmentally conscious consumers and helps differentiate it in the competitive market. The company's revenue is further supported by its innovation in product design and development, which maintains its position as a leader in the composite decking industry.
Trex Company Financial Statement Overview
Summary
Trex Company shows strong financial health with consistent revenue growth, profitability, and efficient cash flow management. While there are minor fluctuations in revenue and free cash flow, the company's financial strategies appear sound with a balanced approach to debt and equity financing.Income Statement
Trex Company has shown a consistent revenue growth trajectory from 2019 to 2024, with a notable increase in gross profit margins and EBIT margins over recent years. The net profit margin has also shown positive trends, reflecting strong profitability. However, there was a slight revenue decline in 2022, indicating potential market volatility or operational challenges.82
Very Positive
Balance Sheet
The company's balance sheet exhibits a healthy equity position with a stable debt-to-equity ratio, suggesting prudent financial leverage. The return on equity has been strong, indicating efficient use of equity to generate profits. However, the equity ratio showed some fluctuation, reflecting changes in asset financing strategies.78
Positive
Cash Flow
Trex's operating cash flow remains robust, with a high operating cash flow to net income ratio, underscoring efficient cash generation relative to earnings. Although free cash flow growth has been inconsistent, recent trends indicate improvement. The free cash flow to net income ratio highlights the company's ability to translate earnings into cash flow effectively.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.15B | 1.09B | 1.11B | 1.20B | 880.83M | Gross Profit |
| 485.67M | 452.41M | 403.99M | 460.50M | 359.46M | EBIT |
| 305.67M | 276.20M | 246.74M | 275.38M | 233.63M | EBITDA |
| 305.67M | 326.39M | 306.46M | 356.83M | 251.57M | Net Income Common Stockholders |
| 226.39M | 205.38M | 184.63M | 208.74M | 175.63M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.29M | 1.96M | 12.32M | 141.05M | 121.70M | Total Assets |
| 1.32B | 932.88M | 933.71M | 920.32M | 770.49M | Total Debt |
| 244.58M | 32.00M | 245.97M | 28.26M | 28.58M | Net Debt |
| 243.29M | 30.04M | 233.65M | -112.79M | -93.12M | Total Liabilities |
| 474.16M | 216.21M | 415.36M | 195.29M | 181.96M | Stockholders Equity |
| 850.14M | 716.67M | 518.35M | 725.03M | 588.53M |
| Cash Flow | Free Cash Flow | |||
| 143.93M | 223.33M | 39.99M | 98.67M | 14.47M | Operating Cash Flow |
| 143.93M | 389.42M | 216.22M | 258.06M | 187.29M | Investing Cash Flow |
| -236.53M | -166.09M | -168.88M | -158.04M | -170.66M | Financing Cash Flow |
| 91.94M | -233.70M | -176.06M | -80.67M | -43.77M |
Trex Company Technical Analysis
Negative
54.95
Price Trends
61.16
Negative
66.76
Negative
68.12
Negative
Market Momentum
-1.03
Negative
44.42
Neutral
23.39
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TREX, the sentiment is Negative. The current price of 54.95 is below the 20-day moving average (MA) of 57.67, below the 50-day MA of 61.16, and below the 200-day MA of 68.12, indicating a bearish trend. The MACD of -1.03 indicates Negative momentum. The RSI at 44.42 is Neutral, neither overbought nor oversold. The STOCH value of 23.39 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TREX.
Trex Company Risk Analysis
Trex Company disclosed 17 risk factors in its most recent earnings report. Trex Company reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Trex Company Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $6.33B | 21.81 | 18.08% | 0.91% | 9.53% | 10.98% | |
77 Outperform | $5.76B | 22.01 | 39.28% | 0.89% | 11.62% | 20.76% | |
72 Outperform | $5.96B | 14.48 | 26.08% | 1.24% | 13.95% | 138.97% | |
65 Neutral | $5.89B | 26.37 | 28.90% | ― | 5.17% | 10.39% | |
62 Neutral | $7.50B | 12.89 | 3.19% | 3.38% | 3.64% | -14.27% | |
61 Neutral | $4.99B | 42.14 | 8.08% | ― | 5.57% | -28.96% | |
40 Underperform | $4.74B | ― | -62.47% | ― | -86.82% | -7.68% |
* Industrials Sector Average
Performance Comparison
TREX
Trex Company
54.95
-35.25
-39.08%
AWI
Armstrong World
134.74
19.26
16.68%
LPX
Louisiana-Pacific
86.38
11.92
16.01%
WTS
Watts Water Technologies
193.71
-4.27
-2.16%
SITE
SiteOne Landscape Supply
113.84
-52.57
-31.59%
JOBY
Joby Aviation
5.93
1.25
26.71%
Trex Company Earnings Call Summary
Earnings Call Date: Feb 24, 2025 | % Change Since: -10.90% | Next Earnings Date: May 12, 2025
Earnings Call Sentiment Neutral
The call highlights Trex's innovation with new product launches and strategic distributor alignments, indicating strong future growth potential and increased market share. However, challenges include declining sales and net income, a decrease in gross margin, and a flat outlook for the repair and remodel market, offset by high capital expenditures.Highlights
Exceeding Revenue Guidance
Trex delivered stronger-than-expected fourth quarter results, exceeding full-year revenue guidance for both sales and EBITDA.
New Product Innovations
Products launched in the last 36 months accounted for approximately 20% of full-year revenues, with several new products featuring innovative heat mitigation technology planned for 2025.
Railing Market Expansion
Trex introduced new railing systems and plans to double market share in the $3.3 billion railing market over the next five years.
Strategic Distributor Alignments
Expanded relationships with key distributors like Weyerhaeuser, Boise Cascade, and others to improve market reach.
Positive Consumer Recognition
Named America's most trusted outdoor decking for the fifth consecutive year with the highest satisfaction scores.
Efficient Production Facility
Arkansas campus set to increase production efficiency, with completion leading to substantial free cash flow in 2026.
Strong Free Cash Flow Outlook
After completing the Arkansas facility, capital expenditures are expected to return to historical levels, enhancing free cash flow.
Lowlights
Decrease in Net Sales
Fourth-quarter net sales were $168 million, a 14% decrease compared to the previous year, primarily due to reduced channel inventory.
Decline in Gross Margin
Gross margin decreased by 340 basis points to 32.7% due to lower utilization.
Net Income Decline
Net income for the fourth quarter was $10 million, a 58% decrease from the previous year.
High Capital Expenditure
Spent $232 million in capital expenditures in 2024, primarily for the Arkansas facility, impacting immediate cash flow.
Flat Repair and Remodel Market
Expectations for the repair and remodel market to be approximately flat in 2025, posing challenges for growth.
Company Guidance
During the Trex Company Fourth Quarter and Full-Year 2024 Earnings Conference Call, the management provided guidance for 2025, forecasting net sales growth of 5% to 7%, driven by strong demand for premium products and double-digit growth in railing sales. The company expects EBITDA margins to exceed 31%, maintaining the record level of 2024, despite one-time startup costs related to their new Arkansas campus. The guidance anticipates continued sell-through of Trex premium decking products, improved demand for entry-level products, and the benefits of new product launches, which accounted for 20% of 2024 revenues. The company is also focused on strategic initiatives, such as expanding its product portfolio and enhancing distribution partnerships to capture a greater market share in the $3.3 billion railing market. Additionally, Trex plans to leverage its investments in branding and digital transformation to drive long-term growth and profitability.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.