In This Article:
Shareholders of Installed Building Products would probably like to forget the past six months even happened. The stock dropped 32.5% and now trades at $169.79. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Following the drawdown, is now an opportune time to buy IBP? Find out in our full research report, it’s free.
Why Does Installed Building Products Spark Debate?
Founded in 1977, Installed Building Products (NYSE:IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.
Two Things to Like:
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Installed Building Products’s 14.2% annualized revenue growth over the last five years was exceptional. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Installed Building Products’s EPS grew at an astounding 27.4% compounded annual growth rate over the last five years, higher than its 14.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Slow Organic Growth Suggests Waning Demand In Core Business
Investors interested in Home Builders companies should track organic revenue in addition to reported revenue. This metric gives visibility into Installed Building Products’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Installed Building Products’s organic revenue averaged 2% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations.
Final Judgment
Installed Building Products has huge potential even though it has some open questions. After the recent drawdown, the stock trades at 14.7× forward price-to-earnings (or $169.79 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.