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Aggressive Growth

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Beacon Roofing Supply (BECN - Analyst Report) is a Zacks #1 Rank (Strong Buy) which should benefit from an improving economy and higher estimates tell us this could happen.

Company Description

Beacon Roofing Supply, Inc. distributes residential and non-residential roofing materials. The company's residential roofing products include asphalt shingles, synthetic slates and tiles, clay and concrete tiles, slates, nail base insulation, metal roofing, felt, wood shingles and shakes, nails and fasteners, metal edgings and flashings, prefabricated flashings, ridges and soffit vents, gutters and downspouts, and other accessories.

A little hit or miss on earnings

BECN is 50/50 on its last six earnings reports, with 3 positive surprises and three earnings misses. Surprisingly, the stock has moved 10% as result of this record only one time. We would expect to see some larger moves on the stock given this track record.

Even more interesting is that the stock moved up by 9% following the September 2010 release in late November. The company reported earnings $0.04 lower than the Zacks Consensus Estimate. A miss of 9% on the bottom line somehow translated into price appreciation of 9% for the stock, an interesting move to say the least.

BECN Earnings This Week

On February 9, 2012 the company is expected to report earnings per share of $0.29 and sales of $475 million. Those numbers are higher than the year ago actual levels of $0.22 in earnings per share and $405 million in sales. Given the lack of reliability of the reports, a wait and see policy may be best.

Valuations

BECN trades at both a discount to the industry for PE on a trailing twelve month basis, but trades at a slight premium on a forward PE. The price to book multiple of 2X is a little less than the industry average of 2.7x. And the price to sales level of 0.6x is close, but still below the industry average of 0.8x. A strong increase in sales would serve to close the gap between the industry average price to sales metric and BECN's multiple.

The Chart

The six month chart for BECN shows just what an aggressive growth investor is looking for. The stock is trading well above the 200 day moving average and has not even attempted to retrace back to that important technical indicator. BECN is a Zacks #1 Rank (Strong Buy).

Beacon Roofing Supply - ticker BECN>
 
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Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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