Illinois-based AZEK Company (AZEK) makes environmentally sustainable products for outdoor living spaces. Its products include decks, trim, rail, porches, outdoor furniture, and lighting. The company sells its products to residential and commercial customers under brands such as AZEK Trim, TimberTech, and Versatex.
AZEK has recently acquired StruXure Outdoor, a maker of aluminum pergolas and cabanas. It counts on the acquisition to complement its existing product portfolio and expand its position in the outdoor living market. StruXure generated $50 million in revenue in 2021, but the market opportunity for pergolas and cabanas is almost $1 billion.
AZEK’s earnings report shows revenue increased 31.1% year-over-year to $346.1 million in Fiscal Q4 2021 ended September 30. That surpassed the consensus estimate of $329.4 million. The company posted adjusted EPS of $0.32, which rose from $0.29 in the same quarter last year and beat the consensus estimate of $0.28.
The company ended the quarter with $250.5 million in cash and $146.7 million in borrowing capacity under its revolving credit facility. It had $464.7 million in debt.
With this in mind, we used TipRanks to take a look at the risk factors for AZEK Company.
Risk Factors
According to the new TipRanks Risk Factors tool, AZEK’s main risk category is Finance and Corporate, representing 44% of the total 41 risks identified for the stock. Production, and Legal and Regulatory, are the next two major risk categories at 20% and 12% of the total risks, respectively. AZEK recently updated its profile with a new Legal and Regulatory risk factor.
The company informs investors that it may face restrictions in its use of loss carryforwards to reduce its future tax liability. AZEK explains that some of its investors sold their shares during Fiscal 2021, resulting in an ownership change under the Internal Revenue Code. It says that the code places an annual limit on the amount of loss carryforwards that a company that undergoes an ownership change can use to lower its tax bill. The company ended fiscal Q4 with $53.5 million in loss carryforwards, which it could apply to minimize its future tax liability in the U.S.
The Finance and Corporate risk factor’s sector average is 33%, versus AZEK’s 44%. AZEK stock has gained about 9% over the past year.
Analysts’ Take
Jefferies analyst Philip Ng recently reiterated a Buy rating on AZEK stock with a price target of $50, which implies 14.47% upside potential.
Consensus among analysts is a Strong Buy based on 6 Buys. The average AZEK price target of $54 implies 23.63% upside potential to current levels.
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