In This Article:
What a brutal six months it’s been for TopBuild. The stock has dropped 24% and now trades at $292.07, rattling many shareholders. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Following the pullback, is now the time to buy BLD? Find out in our full research report, it’s free.
Why Does TopBuild Spark Debate?
Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.
Two Things to Like:
1. Skyrocketing Revenue Shows Strong Momentum
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, TopBuild’s sales grew at an incredible 15.2% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
TopBuild’s EPS grew at an astounding 30.8% compounded annual growth rate over the last five years, higher than its 15.2% 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
We can better understand Home Builders companies by analyzing their organic revenue. This metric gives visibility into TopBuild’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, TopBuild’s organic revenue averaged 1.7% 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
TopBuild has huge potential even though it has some open questions. After the recent drawdown, the stock trades at 13.5× forward price-to-earnings (or $292.07 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More Than TopBuild
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.