Have you been paying attention to shares of Builders FirstSource (
BLDR Quick Quote BLDR - Free Report) ? Shares have been on the move with the stock up 10% over the past month. The stock hit a new 52-week high of $81.43 in the previous session. Builders FirstSource has gained 98.6% since the start of the year compared to the -8.5% move for the Zacks Retail-Wholesale sector and the 47.5% return for the Zacks Building Products - Retail industry. What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 4, 2021, Builders FirstSource reported EPS of $3.39 versus consensus estimate of $1.56 while it beat the consensus revenue estimate by 14.97%.
For the current fiscal year, Builders FirstSource is expected to post earnings of $9.26 per share on $19.61 billion in revenues. This represents a 207.64% change in EPS on a 129.13% change in revenues. For the next fiscal year, the company is expected to earn $6.73 per share on $18 billion in revenues. This represents a year-over-year change of -27.24% and -8.24%, respectively.
Builders FirstSource may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Builders FirstSource has a Value Score of B. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 8.8X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 20X versus its peer group's average of 10.7X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Builders FirstSource currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Builders FirstSource meets the list of requirements. Thus, it seems as though Builders FirstSource shares could have a bit more room to run in the near term.
How Does Builders FirstSource Stack Up to the Competition?
Shares of Builders FirstSource have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Beacon Roofing Supply (
BECN Quick Quote BECN - Free Report) , GMS ( GMS Quick Quote GMS - Free Report) , and The Home Depot ( HD Quick Quote HD - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 2% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Builders FirstSource, even beyond its own solid fundamental situation.