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Trex Company (TREX)
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Trex Company (TREX) AI Stock Analysis

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TREX

Trex Company

(NYSE:TREX)

Rating:69Neutral
Price Target:
$68.00
▲(10.86% Upside)
Trex Company shows strong financial performance with robust profitability and a solid balance sheet. However, challenges in cash flow and a high P/E ratio suggest potential risks. The technical indicators are mixed, reflecting a balanced momentum. The positive outlook from the earnings call, driven by new product success and strategic initiatives, supports future growth prospects.
Positive Factors
Brand and Marketing
Strong success with the new 'Trex Vs' brand campaign and the Enhance decking refresh were positive updates.
Market Growth
Trex is nicely outgrowing the market, consistent with long-term thesis.
Product Development
New products continue to gain traction, and growing dealer/contractor conversions improve market penetration.
Negative Factors
Economic Concerns
Many potential customers remain sidelined due to broader economic concerns, limiting growth opportunities.
Interest Rates and Valuation
Lower interest rates and higher consumer confidence are needed to improve Trex's valuation metrics.
Tariff and Inflation Impact
Trex shares have decreased by 7% year-to-date due to multiple compression caused by tariff uncertainty and high inflation rates.

Trex Company (TREX) vs. SPDR S&P 500 ETF (SPY)

Trex Company Business Overview & Revenue Model

Company DescriptionTrex Company, Inc. manufactures and distributes decking, railing, and outdoor living products and accessories for residential and commercial markets in the United States. The company operates in two segments, Trex Residential and Trex Commercial. It offers decking products under the names Trex Transcend, Trex Select, and Trex Enhance for protection against fading, staining, mold, and scratching; Trex Hideaway, a hidden fastening system; and Trex DeckLighting, a LED dimmable deck lighting for use on posts, floors, and steps. The company also provides Trex Transcend Railing products that are used in Trex decking products and other decking materials; Trex Select Railing products for a simple clean finished look; Trex Enhance Railing system; and Trex Signature aluminum railing for a contemporary look. In addition, it offers Trex Seclusions, a fencing product that includes structural posts, bottom and top rails, pickets, and decorative post caps. In addition, it designs, engineers, and markets architectural and aluminum railing systems, and staging equipment and accessories for the commercial market, as well as sports stadiums and performing arts venues. Further, the company acts as a licensor in various licensing agreements with third parties to manufacture and sell products under the Trex name, including Trex Outdoor Furniture; Trex RainEscape, an above joist deck drainage system; Trex Pergola, a cellular PVC product; Trex Latticeworks outdoor lattice boards; Trex Cornhole boards; Diablo Trex Blade, a saw blade for wood-alternative composite decking; Trex SpiralStairs and structural steel posts; and Trex Outdoor Kitchens, Cabinetry, and Storage products. It sells its products through wholesale distributors, retail lumber dealers, and Home Depot and Lowe's stores, as well as through its direct sales staff, independent sales representatives, and bidding on projects. Trex Company, Inc. was founded in 1996 and is headquartered in Winchester, Virginia.
How the Company Makes MoneyTrex generates revenue primarily through the sale of its composite decking products, railing systems, and other outdoor living accessories. The company's revenue model is largely driven by direct sales to consumers, contractors, and distributors. Key revenue streams include residential decking, which constitutes a significant portion of sales, and commercial projects that utilize Trex products for larger installations. Additionally, Trex benefits from strong brand recognition and loyalty, which is bolstered by its focus on sustainability and innovative product design. The company also engages in partnerships with retailers and distributors to expand its market reach. Seasonal demand, particularly in the spring and summer months, along with strategic marketing initiatives and product diversification, further contribute to its earnings.

Trex Company Earnings Call Summary

Earnings Call Date:Aug 04, 2025
(Q2-2025)
|
% Change Since: -4.60%|
Next Earnings Date:Nov 03, 2025
Earnings Call Sentiment Neutral
The earnings call reflected a mixed sentiment with strong quarterly sales and successful new product launches, countered by a decline in gross margins and net income due to strategic investments and challenging market conditions. The outlook remains positive with expected growth in the second half of the year.
Q2-2025 Updates
Positive Updates
Record Level of Quarterly Sales
Trex achieved a record level of quarterly sales with a 3% net sales growth despite adverse weather conditions and a declining repair and remodel market.
Strong Demand for New Products
New products represented 22% of quarterly sales, significantly ahead of the 13% contribution in the same period last year, driven by Trex Lineage decking and mid-priced select decking line.
Successful State-of-the-Art Facility in Arkansas
The new Arkansas facility surpassed initial expectations, reducing the need for externally purchased plastic pellets, and is expected to become a model for efficient, vertically integrated production.
Positive Financial Performance Outlook
Trex expects similar sales trends in the third quarter, representing substantial year-on-year revenue growth and positive financial performance.
Railing Portfolio Expansion
Trex's expanded railing portfolio gained traction, securing additional shelf space and aligning well with distributor strategies.
Negative Updates
Gross Margin Decline
Gross margin decreased to 40.8%, down 390 basis points from the previous year, primarily due to onetime strategic investments and lower production due to level loading.
Net Income Decrease
Net income was $76 million, a decrease of 13% from $87 million the previous year, impacted by onetime expenses and lower production levels.
Challenging Weather Conditions
Adverse weather conditions slowed construction activity in many parts of the U.S., affecting sales, although the exact impact size is unspecified.
Soft Repair and Remodel Market
The repair and remodel market is projected to be down in 2025 compared to 2024, with consumer uneasiness about the economy possibly impacting sales.
Company Guidance
During the Trex Company's Second Quarter 2025 Earnings Conference Call, the guidance provided highlighted several key metrics and strategic initiatives. Trex achieved a 3% net sales growth, reaching $388 million, despite adverse weather conditions and a declining repair and remodel market. The company anticipated continued sales growth driven by strong demand for Trex composite and aluminum railing and Trex Lineage decking, with wood alternative products gaining 170 basis points of market share over the past 18 months. New products, launched within the last 36 months, contributed 22% to quarterly sales, a significant increase from 13% the previous year. Trex plans to maintain its momentum with ongoing investments in product development and marketing, projecting a 5% to 7% net sales growth for the full year 2025. The company also expects an adjusted EBITDA margin exceeding 31%, with SG&A expenses around 60% of net sales. In terms of financial strategy, Trex highlighted its focus on improving operational efficiencies, notably through its new Arkansas manufacturing facility, which is anticipated to be fully operational by 2027, enhancing production capacity and supporting market growth.

Trex Company Financial Statement Overview

Summary
Trex Company demonstrates strong profitability and a solid balance sheet with low leverage. However, the slowdown in revenue growth and challenges in cash flow generation could pose risks if not addressed. The company is well-positioned but should focus on improving cash flow metrics to sustain its financial health.
Income Statement
75
Positive
Trex Company shows a stable revenue base with a slight decline in the TTM period. The gross profit margin is healthy at 39.3% TTM, although it has decreased from the previous year. Net profit margin is strong at 16.5% TTM, indicating effective cost management. However, the revenue growth rate has slowed significantly, which could be a concern if it continues.
Balance Sheet
80
Positive
The balance sheet reflects a solid financial position with a low debt-to-equity ratio of 0.29 TTM, indicating conservative leverage. The return on equity is robust at 20.5% TTM, showcasing efficient use of equity. The equity ratio is strong, suggesting a stable asset base.
Cash Flow
65
Positive
Cash flow analysis reveals challenges, with a significant decline in free cash flow growth. The operating cash flow to net income ratio is moderate at 0.52 TTM, suggesting room for improvement in cash generation relative to earnings. The free cash flow to net income ratio is low, indicating potential liquidity concerns.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue1.13B1.15B1.09B1.11B1.20B880.83M
Gross Profit443.81M485.67M452.41M403.99M460.50M359.46M
EBITDA310.94M360.34M326.39M306.46M356.83M251.57M
Net Income186.67M226.39M205.38M184.63M208.74M175.63M
Balance Sheet
Total Assets1.54B1.32B932.88M933.71M920.32M770.49M
Cash, Cash Equivalents and Short-Term Investments5.52M1.29M1.96M12.32M141.05M121.70M
Total Debt294.47M255.38M32.00M245.97M28.26M28.58M
Total Liabilities548.60M474.16M216.21M415.36M195.29M181.96M
Stockholders Equity989.26M850.14M716.67M518.35M725.03M588.53M
Cash Flow
Free Cash Flow-70.33M-92.71M223.33M39.99M98.67M14.47M
Operating Cash Flow220.02M143.93M389.42M216.22M258.06M187.29M
Investing Cash Flow-294.43M-236.53M-166.09M-168.88M-158.04M-170.66M
Financing Cash Flow78.75M91.94M-233.70M-176.06M-80.67M-43.77M

Trex Company Technical Analysis

Technical Analysis Sentiment
Negative
Last Price61.34
Price Trends
50DMA
60.80
Positive
100DMA
58.98
Positive
200DMA
63.69
Negative
Market Momentum
MACD
0.12
Positive
RSI
46.66
Neutral
STOCH
56.65
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 61.34 is below the 20-day moving average (MA) of 63.66, above the 50-day MA of 60.80, and below the 200-day MA of 63.69, indicating a neutral trend. The MACD of 0.12 indicates Positive momentum. The RSI at 46.66 is Neutral, neither overbought nor oversold. The STOCH value of 56.65 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 (59)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
79
Outperform
$8.45B28.9139.29%0.64%15.59%23.46%
77
Outperform
$7.99B24.4417.88%0.60%2.95%0.76%
75
Outperform
$11.19B25.9827.68%0.47%0.24%-12.68%
70
Outperform
$7.19B18.8316.84%1.70%-5.79%-9.90%
69
Neutral
$6.87B35.5619.81%-9.65%-28.30%
65
Neutral
$6.71B56.1215.52%0.42%5.39%-34.28%
59
Neutral
C$7.23B-0.684.17%2.34%9.14%-33.97%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TREX
Trex Company
61.34
-6.19
-9.17%
AAON
Aaon
85.98
-8.21
-8.72%
AWI
Armstrong World
193.54
68.61
54.92%
FBIN
Fortune Brands Innovations
57.48
-22.94
-28.53%
SSD
Simpson Manufacturing Co
188.68
3.77
2.04%
WMS
Advanced Drainage Systems
140.44
-21.92
-13.50%

Trex Company Corporate Events

Executive/Board ChangesFinancial Disclosures
Trex Company CFO Resignation and Leadership Transition
Neutral
Jun 25, 2025

On June 23, 2025, Trex Company announced the resignation of its Chief Financial Officer, Brenda Lovcik, who will leave her position to relocate to Minnesota. She will continue in her role until August 5, 2025, after which Bryan Fairbanks, the current CEO and former CFO, will assume the CFO responsibilities on an interim basis. The company has initiated a search for a new CFO. Despite this leadership change, Trex reaffirmed its financial guidance for 2025, projecting revenue growth of 5%-7% and an Adjusted EBITDA margin exceeding 31%.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Aug 21, 2025