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Installed Building (IBP) Looks Promising: Invest in the Stock
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Installed Building Products, Inc. (IBP - Free Report) is poised to gain from the strong end-market demand, the continued success of local branches, asset-light business model and proficient acquisition strategies.
Shares of this residential insulation installer have gained 6% over the past three months compared with the Zacks Building Products - Miscellaneous industry’s 8.8% rise. Although shares of IBP have slightly underperformed its industry, the 2022 and 2023 earnings per share estimates for this Zacks Rank #2 (Buy) company have moved 4.1% and 7.5% upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We believe that IBP offers a sound investment opportunity, as evident from its VGM Score of A.
Image Source: Zacks Investment Research
Let us delve deeper into other factors that make this stock a profitable pick.
What Makes the Stock an Attractive Pick?
Inorganic Moves: Acquisitions are an important part of Installed Building Products’ growth strategy. This led to the diversification of its geographies, end markets and products. The company maintains a robust pipeline of acquisition candidates that takes into account geographic expansion in the core residential insulation end market and acquisition opportunities that help in the continuation of end-market and end-product diversification strategies.
During the first six months of 2022, it completed three business combinations. The latest of these acquisitions was that of Pisgah Insulation and Fireplaces of NC, LLC, in March 2022.
Higher Return on Equity (ROE): Installed Building Products’ trailing 12-month ROE is indicative of growth potential. ROE for the trailing 12 months is 50.9%, much higher than the industry’s 5.7%, reflecting the company’s efficient usage of shareholders’ funds.
Solid Performance: The company has been capitalizing on strong end-market demand and the continued success of local branches, which prudently align selling prices with the value IBP offers its customers. Although interest rates continue to increase from historically low levels, the company remains optimistic, given the strong demand for installation services.
The company’s net revenues grew 38.7% year over year to $488.1 million during second-quarter 2022. Adjusted EBITDA grew 53.1% to $119.5 million from a year ago, backed by strong sales growth, improved gross margin and lower selling and administrative expenses (as a percent of net revenues).
Meanwhile, the company has also returned $59.3 million to shareholders in the second quarter through dividends and share repurchases.
Other Key Picks
Arcosa, Inc. (ACA - Free Report) , currently sporting a Zacks Rank #1, is a manufacturer of infrastructure-related products and services, serving construction, energy and transportation markets.
ACA’s expected earnings growth rate for 2022 is 19.7%. The Zacks Consensus Estimate for current-year earnings has improved to $2.31 per share from $2.08 over the past 30 days.
United Rentals, Inc. (URI - Free Report) , presently sporting a Zacks Rank #1, has been benefiting from a broad-based recovery of activity across its end markets served. Higher margins from rental revenues and used equipment sales are added benefits.
The Zacks Consensus Estimate for URI’s 2022 earnings rose to $31.73 per share from $31.66 in the past 30 days. The estimated figure suggests 43.8% year-over-year growth.
Gibraltar Industries, Inc. (ROCK - Free Report) , currently carrying a Zacks Rank #2, is benefiting from its three-pillar value creation strategy, a strong housing market and solid demand for legacy and TerraSmart businesses.
ROCK’s expected earnings growth rate for 2022 is 19.4%. The Zacks Consensus Estimate for current-year earnings has increased to $3.32 from $3.30 per share over the past 30 days.
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Installed Building (IBP) Looks Promising: Invest in the Stock
Installed Building Products, Inc. (IBP - Free Report) is poised to gain from the strong end-market demand, the continued success of local branches, asset-light business model and proficient acquisition strategies.
Shares of this residential insulation installer have gained 6% over the past three months compared with the Zacks Building Products - Miscellaneous industry’s 8.8% rise. Although shares of IBP have slightly underperformed its industry, the 2022 and 2023 earnings per share estimates for this Zacks Rank #2 (Buy) company have moved 4.1% and 7.5% upward over the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We believe that IBP offers a sound investment opportunity, as evident from its VGM Score of A.
Image Source: Zacks Investment Research
Let us delve deeper into other factors that make this stock a profitable pick.
What Makes the Stock an Attractive Pick?
Inorganic Moves: Acquisitions are an important part of Installed Building Products’ growth strategy. This led to the diversification of its geographies, end markets and products. The company maintains a robust pipeline of acquisition candidates that takes into account geographic expansion in the core residential insulation end market and acquisition opportunities that help in the continuation of end-market and end-product diversification strategies.
During the first six months of 2022, it completed three business combinations. The latest of these acquisitions was that of Pisgah Insulation and Fireplaces of NC, LLC, in March 2022.
Higher Return on Equity (ROE): Installed Building Products’ trailing 12-month ROE is indicative of growth potential. ROE for the trailing 12 months is 50.9%, much higher than the industry’s 5.7%, reflecting the company’s efficient usage of shareholders’ funds.
Solid Performance: The company has been capitalizing on strong end-market demand and the continued success of local branches, which prudently align selling prices with the value IBP offers its customers. Although interest rates continue to increase from historically low levels, the company remains optimistic, given the strong demand for installation services.
The company’s net revenues grew 38.7% year over year to $488.1 million during second-quarter 2022. Adjusted EBITDA grew 53.1% to $119.5 million from a year ago, backed by strong sales growth, improved gross margin and lower selling and administrative expenses (as a percent of net revenues).
Meanwhile, the company has also returned $59.3 million to shareholders in the second quarter through dividends and share repurchases.
Other Key Picks
Arcosa, Inc. (ACA - Free Report) , currently sporting a Zacks Rank #1, is a manufacturer of infrastructure-related products and services, serving construction, energy and transportation markets.
ACA’s expected earnings growth rate for 2022 is 19.7%. The Zacks Consensus Estimate for current-year earnings has improved to $2.31 per share from $2.08 over the past 30 days.
United Rentals, Inc. (URI - Free Report) , presently sporting a Zacks Rank #1, has been benefiting from a broad-based recovery of activity across its end markets served. Higher margins from rental revenues and used equipment sales are added benefits.
The Zacks Consensus Estimate for URI’s 2022 earnings rose to $31.73 per share from $31.66 in the past 30 days. The estimated figure suggests 43.8% year-over-year growth.
Gibraltar Industries, Inc. (ROCK - Free Report) , currently carrying a Zacks Rank #2, is benefiting from its three-pillar value creation strategy, a strong housing market and solid demand for legacy and TerraSmart businesses.
ROCK’s expected earnings growth rate for 2022 is 19.4%. The Zacks Consensus Estimate for current-year earnings has increased to $3.32 from $3.30 per share over the past 30 days.