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Trex Company (TREX)
NYSE:TREX
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Trex Company
(NYSE:TREX)
Rating:66Neutral
Price Target:
$61.00
▲( 7.17% Upside)
Positive Factors
Financial Performance
TREX reported 1Q25 adj. EPS ahead of estimates and maintained its 2025 guidance.
Market Position
Trex is the number one brand in the composite decking space with initiatives to drive growth in related categories, potentially leading to faster than market growth.
New Products and Innovations
New products gaining traction, accounting for approximately 22% of sales over the past 36 months and receiving positive feedback from customers and contractors.
Negative Factors
Margins and Costs
Second-quarter margins are guided below the Street due to level loading of production and one-time costs.
Sales Performance
Sales are down 9% year over year mainly due to the previous year's channel inventory build shifting out of the current quarter.
Valuation
The stock's valuation, trading at roughly 18x our 2025E EBITDA, represents only a modest discount to its close peer AZEK, as somewhat full on a relative basis.
Trex Company (TREX) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$6.10B
Dividend YieldN/A
Average Volume (3M)1.34M
Price to Earnings (P/E)31.1
Beta (1Y)1.37
Revenue Growth-9.10%
EPS Growth-21.50%
CountryUS
Employees1,838
SectorIndustrials
Sector Strength92
IndustryConstruction
Share Statistics
EPS (TTM)0.60
Shares Outstanding107,227,050
10 Day Avg. Volume1,207,419
30 Day Avg. Volume1,335,912
Financial Highlights & Ratios
PEG Ratio-5.44
Price to Book (P/B)7.28
Price to Sales (P/S)0.00
P/FCF Ratio-66.80
Enterprise Value/Market Cap1.06
Enterprise Value/Revenue1.34
Enterprise Value/Gross Profit13.27
Enterprise Value/Ebitda4.33
Forecast
1Y Price Target
$68.38Price Target Upside20.13% 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 demonstrates strong financial health with consistent revenue growth, profitability, and efficient cash flow management. However, minor fluctuations in revenue and free cash flow indicate potential market volatility.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 |
| 360.35M | 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 |
| 255.38M | 32.00M | 245.97M | 28.26M | 28.58M | Net Debt |
| 254.09M | 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 | |||
| -92.71M | 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
56.92
Price Trends
57.80
Negative
62.16
Negative
65.20
Negative
Market Momentum
0.19
Positive
44.79
Neutral
11.35
Positive
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 56.92 is below the 20-day moving average (MA) of 58.92, below the 50-day MA of 57.80, and below the 200-day MA of 65.20, indicating a bearish trend. The MACD of 0.19 indicates Positive momentum. The RSI at 44.79 is Neutral, neither overbought nor oversold. The STOCH value of 11.35 is Positive, 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 (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $7.92B | 27.17 | 17.61% | 0.72% | 3.89% | 8.17% | |
77 Outperform | $6.71B | 24.73 | 38.60% | 0.76% | 14.55% | 17.54% | |
74 Outperform | $6.45B | 16.28 | 24.41% | 1.14% | 8.09% | 55.08% | |
66 Neutral | $6.10B | 31.14 | 23.07% | ― | -9.10% | -21.50% | |
64 Neutral | $4.39B | 11.81 | 5.20% | 249.39% | 3.96% | -12.36% | |
64 Neutral | $5.19B | 45.91 | 7.64% | ― | 4.73% | -27.46% | |
44 Neutral | $5.25B | ― | -64.96% | ― | -89.50% | -10.50% |
* Industrials Sector Average
Performance Comparison
TREX
Trex Company
56.92
-29.79
-34.36%
AWI
Armstrong World
154.43
39.82
34.74%
LPX
Louisiana-Pacific
92.64
3.97
4.48%
WTS
Watts Water Technologies
237.29
35.88
17.81%
SITE
SiteOne Landscape Supply
115.79
-36.10
-23.77%
JOBY
Joby Aviation
6.63
1.77
36.42%
Trex Company Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: -2.37%|
Next Earnings Date:Aug 11, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted a strong start to the year with higher than expected sales and successful product innovations. However, these were tempered by a decline in net sales and gross margin, increased expenses, and uncertainties related to tariffs. Despite these challenges, the company maintains a strong market position and strategic initiatives are expected to drive future growth.Q1-2025 Updates
Positive Updates
Higher Than Expected Sales
Trex Company delivered higher than expected sales in Q1 2025, driven by strong demand for premium products and significant pickup in March demand.
New Product Success
New products launched within the last 36 months accounted for approximately 22% of trailing 12-month sales, more than twice the level from the previous year.
Successful Dealer Conversions
Increased number of dealers converted to the Trex brand, with a pace of TrexPro recruitment and qualification meaningfully ahead of the same period last year.
Strategic Inventory Management
Implementation of a new inventory strategy, designed to reduce volatility and improve overall operating efficiency, is yielding positive results.
Strong Market Position
Trex maintains a strong market position with a significant market share in the decking and railing category, supported by expanded distributor partnerships.
Negative Updates
Decrease in Net Sales
First quarter net sales were $340 million, a decrease of 9% from $374 million in the previous year, primarily due to the absence of a $40 million channel inventory build.
Gross Margin Decline
Gross margin decreased by 490 basis points to 40.5%, impacted by railing conversion costs, lower production, and changes to the enhanced decking production process.
Increased SG&A Expenses
Selling, general, and administrative expenses increased to $56 million or 16.5% of net sales, from $51 million or 13.5% of net sales.
Net Income Decline
Net income decreased by 32% to $60 million or $0.56 per diluted share, from $89 million or $0.82 per diluted share in the previous year.
Tariff Uncertainties
Less than 5% of cost of sales is impacted by tariffs, with ongoing uncertainties around tariff-related costs affecting aluminum and steel purchases.
Company Guidance
During Trex Company, Inc.'s first-quarter 2025 earnings call, key metrics and guidance were outlined. The company achieved net sales of $340 million, a decrease from $374 million the previous year, but better than expected due to strong demand for premium products. The first quarter saw a gross profit of $138 million with a gross margin of 40.5%. New products launched in the past 36 months contributed 22% to the trailing 12-month sales, twice the level of last year's first quarter. Trex expects mid to high-single-digit growth for the year, with a projection of 5% to 7% net sales growth. Adjusted EBITDA margin is anticipated to exceed 31%, with SG&A expenses around 16% of net sales. Capital expenditures are projected at $200 million, with Arkansas campus development continuing. Tariff impacts are expected to affect less than 5% of cost of sales, with mitigation efforts underway. The company remains focused on expanding its product offerings and leveraging strong distributor and dealer partnerships.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.