Trex Company (TREX) AI Stock Analysis

• Market Cap: $5.90B
• Dividend Yield: N/A
• Average Volume (3M): 2.20M
• Price to Earnings (P/E): 26.4
• Beta (1Y): 1.51
• Revenue Growth: 5.17%
• EPS Growth: 10.39%
• Country: US
• Employees: 1,838
• Sector: Industrials
• Sector Strength: 63
• Industry: Construction
• EPS (TTM): 2.08
• Shares Outstanding: 107,219,920
• 10 Day Avg. Volume: 2,191,767
• 30 Day Avg. Volume: 2,198,385
• PEG Ratio: 2.54
• Price to Book (P/B): N/A
• Price to Sales (P/S): 5.53
• Price to Cash Flow (P/CF): -187.90
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $75.70
• Price Target Upside: 37.59% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 12

Trex Company displays strong financial performance with consistent revenue growth and efficient cash flow management, though slightly offset by recent revenue fluctuations. The bearish technical indicators and high P/E ratio indicate caution, as the stock may be overvalued at current levels. The earnings call provides a mixed outlook, highlighting both strategic growth initiatives and immediate financial challenges.

Positive Factors

Financial Performance

Trex reported strong 4Q24 results with revenue, EBITDA, and EPS all coming in well above Street estimates.

Growth Potential

Trex is the number one brand in the composite decking space, which has an ongoing material conversion story that should lead to faster than market growth in the years ahead.

Negative Factors

Market Risks

While the entry-level market is stabilizing, there are still risks that remain.

Revenue Decline

Guidance outlined a meaningful 1Q25 revenue decline due in large part to smaller channel inventory builds.

Trex Company Business Overview & Revenue Model

Company Description

Trex 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 Money

Trex Company generates revenue primarily through the manufacturing and sale of its composite decking and railing products. The company's revenue streams include direct sales to retailers and distributors, who then sell these products to end consumers, as well as direct sales to professional contractors and builders. Significant partnerships with home improvement retailers like Home Depot and Lowe's also contribute to its earnings by expanding its market reach. Additionally, Trex benefits from its focus on sustainability, as its products are made from recycled materials, which appeals to environmentally conscious consumers and helps differentiate it in the competitive market. The company's revenue is further supported by its innovation in product design and development, which maintains its position as a leader in the composite decking industry.

Trex Company Financial Statement Overview

Summary

Trex Company shows strong financial health with consistent revenue growth, profitability, and efficient cash flow management. While there are minor fluctuations in revenue and free cash flow, the company's financial strategies appear sound with a balanced approach to debt and equity financing.

Income Statement

Trex Company has shown a consistent revenue growth trajectory from 2019 to 2024, with a notable increase in gross profit margins and EBIT margins over recent years. The net profit margin has also shown positive trends, reflecting strong profitability. However, there was a slight revenue decline in 2022, indicating potential market volatility or operational challenges.

Balance Sheet

The company's balance sheet exhibits a healthy equity position with a stable debt-to-equity ratio, suggesting prudent financial leverage. The return on equity has been strong, indicating efficient use of equity to generate profits. However, the equity ratio showed some fluctuation, reflecting changes in asset financing strategies.

Cash Flow

Trex's operating cash flow remains robust, with a high operating cash flow to net income ratio, underscoring efficient cash generation relative to earnings. Although free cash flow growth has been inconsistent, recent trends indicate improvement. The free cash flow to net income ratio highlights the company's ability to translate earnings into cash flow effectively.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
1.15B	1.09B	1.11B	1.20B	880.83M
	Gross Profit
485.67M	452.41M	403.99M	460.50M	359.46M
	EBIT
305.67M	276.20M	246.74M	275.38M	233.63M
	EBITDA
305.67M	326.39M	306.46M	356.83M	251.57M
	Net Income Common Stockholders
226.39M	205.38M	184.63M	208.74M	175.63M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.29M	1.96M	12.32M	141.05M	121.70M
	Total Assets
1.32B	932.88M	933.71M	920.32M	770.49M
	Total Debt
244.58M	32.00M	245.97M	28.26M	28.58M
	Net Debt
243.29M	30.04M	233.65M	-112.79M	-93.12M
	Total Liabilities
474.16M	216.21M	415.36M	195.29M	181.96M
	Stockholders Equity
850.14M	716.67M	518.35M	725.03M	588.53M
Cash Flow		Free Cash Flow
143.93M	223.33M	39.99M	98.67M	14.47M
	Operating Cash Flow
143.93M	389.42M	216.22M	258.06M	187.29M
	Investing Cash Flow
-236.53M	-166.09M	-168.88M	-158.04M	-170.66M
	Financing Cash Flow
91.94M	-233.70M	-176.06M	-80.67M	-43.77M

Trex Company Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 55.02
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: 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 55.02 is below the 20-day moving average (MA) of 57.83, below the 50-day MA of 63.08, and below the 200-day MA of 68.76, indicating a bearish trend. The MACD of -1.03 indicates Negative momentum. The RSI at 44.42 is Neutral, neither overbought nor oversold. The STOCH value of 23.39 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TREX.

Trex Company Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
WTS	77 Outperform	$6.26B	21.57	18.08%	0.92%	9.53%	10.98%
AWI	77 Outperform	$5.87B	22.43	39.28%	0.90%	11.62%	20.76%
LPX	72 Outperform	$6.00B	14.55	26.08%	1.23%	13.95%	138.97%
TREX	65 Neutral	$5.90B	26.41	28.90%	―	5.17%	10.39%
SITE	63 Neutral	$5.01B	41.24	8.08%	―	5.57%	-28.96%
Sector *	62 Neutral	$7.26B	12.38	3.01%	3.40%	3.58%	-14.13%
JOBY	40 Underperform	$4.22B	―	-62.47%	―	-86.82%	-7.68%