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Trex Company (TREX)
NYSE:TREX
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Trex Company
(NYSE:TREX)
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Rating:64Neutral
Price Target:
$58.00
▲(10.08% Upside)
Trex Company has a solid financial foundation with strong profitability and a robust balance sheet. However, technical indicators suggest bearish momentum, and valuation metrics indicate the stock may be overvalued. The mixed sentiment from the earnings call, with positive sales growth but declining margins, further influences the overall score.
Positive Factors
Strong Product Demand
The increased contribution from new products indicates successful innovation and market acceptance, supporting long-term revenue growth and competitive positioning.
Operational Efficiency
The new facility enhances production efficiency and cost control, strengthening Trex's supply chain and supporting sustainable margin improvement.
Market Share Expansion
Gaining market share in wood alternatives reflects Trex's competitive advantage and positions the company for continued growth in a key segment.
Negative Factors
Gross Margin Decline
The decline in gross margin due to strategic investments and lower production could pressure profitability if not offset by revenue growth or cost efficiencies.
Net Income Decrease
A decrease in net income suggests challenges in maintaining profitability, which could impact financial flexibility and investor confidence if persistent.
Cash Flow Challenges
Challenges in cash flow generation may limit Trex's ability to invest in growth opportunities and manage financial obligations effectively.
Trex Company (TREX) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$5.65B
Dividend YieldN/A
Average Volume (3M)1.69M
Price to Earnings (P/E)30.4
Beta (1Y)1.27
Revenue Growth-9.65%
EPS Growth-28.30%
CountryUS
Employees1,838
SectorIndustrials
Sector Strength72
IndustryConstruction
Share Statistics
EPS (TTM)0.73
Shares Outstanding107,234,320
10 Day Avg. Volume1,647,357
30 Day Avg. Volume1,691,100
Financial Highlights & Ratios
PEG Ratio3.12
Price to Book (P/B)8.78
Price to Sales (P/S)6.49
P/FCF Ratio-80.56
Enterprise Value/Market Cap1.08
Enterprise Value/Revenue5.42
Enterprise Value/Gross Profit13.80
Enterprise Value/Ebitda19.69
Forecast
1Y Price Target
$69.89Price Target Upside32.64% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering11
Trex Company Business Overview & Revenue Model
Company DescriptionTrex Company, Inc. manufactures and distributes decking, railing, and outdoor living products and accessories for residential and commercial markets in the United States. The company operates in two segments, Trex Residential and Trex Commercial. It offers decking products under the names Trex Transcend, Trex Select, and Trex Enhance for protection against fading, staining, mold, and scratching; Trex Hideaway, a hidden fastening system; and Trex DeckLighting, a LED dimmable deck lighting for use on posts, floors, and steps. The company also provides Trex Transcend Railing products that are used in Trex decking products and other decking materials; Trex Select Railing products for a simple clean finished look; Trex Enhance Railing system; and Trex Signature aluminum railing for a contemporary look. In addition, it offers Trex Seclusions, a fencing product that includes structural posts, bottom and top rails, pickets, and decorative post caps. In addition, it designs, engineers, and markets architectural and aluminum railing systems, and staging equipment and accessories for the commercial market, as well as sports stadiums and performing arts venues. Further, the company acts as a licensor in various licensing agreements with third parties to manufacture and sell products under the Trex name, including Trex Outdoor Furniture; Trex RainEscape, an above joist deck drainage system; Trex Pergola, a cellular PVC product; Trex Latticeworks outdoor lattice boards; Trex Cornhole boards; Diablo Trex Blade, a saw blade for wood-alternative composite decking; Trex SpiralStairs and structural steel posts; and Trex Outdoor Kitchens, Cabinetry, and Storage products. It sells its products through wholesale distributors, retail lumber dealers, and Home Depot and Lowe's stores, as well as through its direct sales staff, independent sales representatives, and bidding on projects. Trex Company, Inc. was founded in 1996 and is headquartered in Winchester, Virginia.
How the Company Makes MoneyTrex generates revenue primarily through the sale of its composite decking products, railing systems, and other outdoor living accessories. The company's revenue model is largely driven by direct sales to consumers, contractors, and distributors. Key revenue streams include residential decking, which constitutes a significant portion of sales, and commercial projects that utilize Trex products for larger installations. Additionally, Trex benefits from strong brand recognition and loyalty, which is bolstered by its focus on sustainability and innovative product design. The company also engages in partnerships with retailers and distributors to expand its market reach. Seasonal demand, particularly in the spring and summer months, along with strategic marketing initiatives and product diversification, further contribute to its earnings.
Trex Company Earnings Call Summary
Earnings Call Date:Aug 04, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Nov 03, 2025
Earnings Call Sentiment Neutral
The earnings call reflected a mixed sentiment with strong quarterly sales and successful new product launches, countered by a decline in gross margins and net income due to strategic investments and challenging market conditions. The outlook remains positive with expected growth in the second half of the year.Q2-2025 Updates
Positive Updates
Record Level of Quarterly Sales
Trex achieved a record level of quarterly sales with a 3% net sales growth despite adverse weather conditions and a declining repair and remodel market.
Strong Demand for New Products
New products represented 22% of quarterly sales, significantly ahead of the 13% contribution in the same period last year, driven by Trex Lineage decking and mid-priced select decking line.
Successful State-of-the-Art Facility in Arkansas
The new Arkansas facility surpassed initial expectations, reducing the need for externally purchased plastic pellets, and is expected to become a model for efficient, vertically integrated production.
Positive Financial Performance Outlook
Trex expects similar sales trends in the third quarter, representing substantial year-on-year revenue growth and positive financial performance.
Railing Portfolio Expansion
Trex's expanded railing portfolio gained traction, securing additional shelf space and aligning well with distributor strategies.
Negative Updates
Gross Margin Decline
Gross margin decreased to 40.8%, down 390 basis points from the previous year, primarily due to onetime strategic investments and lower production due to level loading.
Net Income Decrease
Net income was $76 million, a decrease of 13% from $87 million the previous year, impacted by onetime expenses and lower production levels.
Challenging Weather Conditions
Adverse weather conditions slowed construction activity in many parts of the U.S., affecting sales, although the exact impact size is unspecified.
Soft Repair and Remodel Market
The repair and remodel market is projected to be down in 2025 compared to 2024, with consumer uneasiness about the economy possibly impacting sales.
Company Guidance
During the Trex Company's Second Quarter 2025 Earnings Conference Call, the guidance provided highlighted several key metrics and strategic initiatives. Trex achieved a 3% net sales growth, reaching $388 million, despite adverse weather conditions and a declining repair and remodel market. The company anticipated continued sales growth driven by strong demand for Trex composite and aluminum railing and Trex Lineage decking, with wood alternative products gaining 170 basis points of market share over the past 18 months. New products, launched within the last 36 months, contributed 22% to quarterly sales, a significant increase from 13% the previous year. Trex plans to maintain its momentum with ongoing investments in product development and marketing, projecting a 5% to 7% net sales growth for the full year 2025. The company also expects an adjusted EBITDA margin exceeding 31%, with SG&A expenses around 60% of net sales. In terms of financial strategy, Trex highlighted its focus on improving operational efficiencies, notably through its new Arkansas manufacturing facility, which is anticipated to be fully operational by 2027, enhancing production capacity and supporting market growth.Trex Company Financial Statement Overview
Summary
Trex Company demonstrates strong profitability with a healthy net profit margin and a solid balance sheet with low leverage. However, the slowdown in revenue growth and challenges in cash flow generation could pose risks if not addressed.Income Statement
Trex Company shows a stable revenue base with a slight decline in the TTM period. The gross profit margin is healthy at 39.3% TTM, although it has decreased from the previous year. Net profit margin is strong at 16.5% TTM, indicating effective cost management. However, the revenue growth rate has slowed significantly, which could be a concern if it continues.75
Positive
Balance Sheet
The balance sheet reflects a solid financial position with a low debt-to-equity ratio of 0.29 TTM, indicating conservative leverage. The return on equity is robust at 20.5% TTM, showcasing efficient use of equity. The equity ratio is strong, suggesting a stable asset base.80
Positive
Cash Flow
Cash flow analysis reveals challenges, with a significant decline in free cash flow growth. The operating cash flow to net income ratio is moderate at 0.52 TTM, suggesting room for improvement in cash generation relative to earnings. The free cash flow to net income ratio is low, indicating potential liquidity concerns.65
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.13B | 1.15B | 1.09B | 1.11B | 1.20B | 880.83M |
| Gross Profit | 443.81M | 485.67M | 452.41M | 403.99M | 460.50M | 359.46M |
| EBITDA | 310.94M | 360.34M | 326.39M | 306.46M | 356.83M | 251.57M |
| Net Income | 186.67M | 226.39M | 205.38M | 184.63M | 208.74M | 175.63M |
Balance Sheet | ||||||
| Total Assets | 1.54B | 1.32B | 932.88M | 933.71M | 920.32M | 770.49M |
| Cash, Cash Equivalents and Short-Term Investments | 5.52M | 1.29M | 1.96M | 12.32M | 141.05M | 121.70M |
| Total Debt | 294.47M | 255.38M | 32.00M | 253.46M | 35.33M | 35.29M |
| Total Liabilities | 548.60M | 474.16M | 216.21M | 415.36M | 195.29M | 181.96M |
| Stockholders Equity | 989.26M | 850.14M | 716.67M | 518.35M | 725.03M | 588.53M |
Cash Flow | ||||||
| Free Cash Flow | -74.59M | -92.71M | 223.33M | 39.99M | 98.67M | 14.47M |
| Operating Cash Flow | 220.03M | 143.93M | 389.42M | 216.22M | 258.06M | 187.29M |
| Investing Cash Flow | -294.43M | -236.53M | -166.09M | -168.88M | -158.04M | -170.66M |
| Financing Cash Flow | 78.75M | 91.94M | -233.70M | -176.06M | -80.67M | -43.77M |
Trex Company Technical Analysis
Negative
52.69
Price Trends
60.04
Negative
59.24
Negative
61.28
Negative
Market Momentum
-2.56
Negative
37.82
Neutral
69.10
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TREX, the sentiment is Negative. The current price of 52.69 is below the 20-day moving average (MA) of 55.12, below the 50-day MA of 60.04, and below the 200-day MA of 61.28, indicating a bearish trend. The MACD of -2.56 indicates Negative momentum. The RSI at 37.82 is Neutral, neither overbought nor oversold. The STOCH value of 69.10 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TREX.
Trex Company Risk Analysis
Trex Company disclosed 17 risk factors in its most recent earnings report. Trex Company reported the most risks in the "Production" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Trex Company Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $8.49B | 29.04 | 39.29% | 0.63% | 15.59% | 23.46% | |
75 Outperform | $11.04B | 25.63 | 27.68% | 0.48% | 0.24% | -12.68% | |
69 Neutral | $6.35B | 16.62 | 16.84% | 1.87% | -5.79% | -9.90% | |
68 Neutral | $7.04B | 21.55 | 17.88% | 0.67% | 2.95% | 0.76% | |
66 Neutral | $8.02B | 67.05 | 15.52% | 0.39% | 5.39% | -34.28% | |
64 Neutral | $5.65B | 30.35 | 19.81% | ― | -9.65% | -28.30% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
TREX
Trex Company
52.69
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-18.64%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.