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

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TREX

Trex Company

(NYSE:TREX)

Rating:69Neutral
Price Target:
$73.00
▲(15.11%Upside)
Trex's strong financial performance and positive market momentum are key strengths, but challenges in cash flow management and valuation concerns weigh on the stock. The company needs to address its free cash flow issues and monitor overbought technical conditions to sustain its current market position.
Positive Factors
Competitive Advantage
TREX's recycling capabilities create a competitive advantage by allowing the company to use lower cost materials, which are significantly cheaper than virgin or higher-end recycled materials.
Earnings Growth
The Arkansas factory coming online is a key support for the long-term thesis for mid-teens EPS growth for Trex.
Market Share Expansion
TREX expects to double its railing market share over the next 5 years by offering new products and exclusive railing relationships.
Negative Factors
Interest Rates
Lower interest rates and higher consumer confidence are needed to improve Trex's valuation metrics.
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.
Stock Valuation
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. (TREX) is a leading manufacturer of wood-alternative decking products and outdoor living solutions. Founded in 1996 and headquartered in Winchester, Virginia, Trex operates in the building materials sector, specializing in eco-friendly composite decking, railing, and related products. The company's core offerings include high-performance, low-maintenance decking and railing products made from recycled wood and plastic, which are designed to provide a durable and sustainable alternative to traditional wood decking.
How the Company Makes MoneyTrex Company makes money primarily through the sale of its composite decking and railing products. Its revenue model is based on manufacturing and distributing eco-friendly outdoor living solutions to contractors, builders, and retail customers through a network of dealers and distributors. Key revenue streams include sales of its flagship Trex decking products, Trex railing systems, and other related accessories. The company benefits from strong brand recognition and a growing demand for sustainable and low-maintenance outdoor products. Strategic partnerships with major retailers, such as The Home Depot and Lowe's, also play a significant role in expanding its market reach and driving sales.

Trex Company Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q1-2025)
|
% Change Since: 8.78%|
Next Earnings Date:Aug 04, 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.

Trex Company Financial Statement Overview

Summary
Trex Company demonstrates strong profitability and a robust balance sheet with consistent returns and manageable leverage. However, challenges in revenue growth and free cash flow management require attention.
Income Statement
78
Positive
Trex Company shows strong profitability with a stable gross profit margin of approximately 40% over recent periods. However, there is a slight dip in total revenue in the TTM, indicating a potential challenge in maintaining growth. The net profit margin remains robust at around 17.7% for TTM, providing a solid return on sales despite slight fluctuations in EBIT and EBITDA margins.
Balance Sheet
82
Very Positive
The company's balance sheet is strong, with a healthy equity ratio of about 55.5% as of TTM, reflecting solid asset backing. The debt-to-equity ratio has increased due to higher debt levels, yet remains manageable. Return on equity is impressive, driven by consistent profitability, signaling efficient use of shareholder funds.
Cash Flow
65
Positive
Trex's cash flow performance highlights some concerns, particularly with free cash flow turning negative in recent periods. Operating cash flow remains solid, but high capital expenditures have pressured free cash flow, posing a risk if this trend continues. The operating cash flow to net income ratio is healthy, indicating good cash generation relative to profits.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue1.12B1.15B1.09B1.11B1.20B880.83M
Gross Profit453.79M485.67M452.41M403.99M460.50M359.46M
EBITDA309.64M360.34M326.39M306.46M356.83M251.57M
Net Income197.76M226.39M205.38M184.63M208.74M175.63M
Balance Sheet
Total Assets1.64B1.32B932.88M933.71M920.32M770.49M
Cash, Cash Equivalents and Short-Term Investments4.96M1.29M1.96M12.32M141.05M121.70M
Total Debt494.83M255.38M32.00M245.97M28.26M28.58M
Total Liabilities731.12M474.16M216.21M415.36M195.29M181.96M
Stockholders Equity910.08M850.14M716.67M518.35M725.03M588.53M
Cash Flow
Free Cash Flow-115.08M-92.71M223.33M39.99M98.67M14.47M
Operating Cash Flow163.96M143.93M389.42M216.22M258.06M187.29M
Investing Cash Flow-278.89M-236.53M-166.09M-168.88M-158.04M-170.66M
Financing Cash Flow116.84M91.94M-233.70M-176.06M-80.67M-43.77M

Trex Company Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price63.42
Price Trends
50DMA
59.11
Positive
100DMA
58.38
Positive
200DMA
63.90
Negative
Market Momentum
MACD
2.04
Positive
RSI
52.45
Neutral
STOCH
39.37
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TREX, the sentiment is Neutral. The current price of 63.42 is below the 20-day moving average (MA) of 63.70, above the 50-day MA of 59.11, and below the 200-day MA of 63.90, indicating a neutral trend. The MACD of 2.04 indicates Positive momentum. The RSI at 52.45 is Neutral, neither overbought nor oversold. The STOCH value of 39.37 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 (60)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
74
Outperform
$8.14B27.8539.29%0.63%15.59%23.46%
71
Outperform
$7.51B22.8617.88%0.63%2.95%0.76%
70
Outperform
$6.56B15.9716.84%1.80%-5.79%-9.90%
69
Neutral
$6.89B35.1423.07%-9.10%-21.50%
69
Neutral
$8.83B19.7631.26%0.58%1.04%-10.78%
68
Neutral
$6.64B42.9019.85%0.44%8.24%-11.66%
60
Neutral
AU$1.67B11.1411.24%3.51%7.29%7.00%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TREX
Trex Company
63.42
-13.84
-17.91%
AAON
Aaon
81.65
-3.81
-4.46%
AWI
Armstrong World
188.52
63.24
50.48%
FBIN
Fortune Brands Innovations
55.83
-19.62
-26.00%
SSD
Simpson Manufacturing Co
179.17
1.34
0.75%
WMS
Advanced Drainage Systems
113.76
-46.92
-29.20%

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%.

The most recent analyst rating on (TREX) stock is a Hold with a $80.00 price target. To see the full list of analyst forecasts on Trex Company stock, see the TREX Stock Forecast page.

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: Jul 23, 2025