Builders FirstSource is an up-and-coming firm that has been quietly producing triple-digit profits, much like Tesla. You might not be familiar with this name, but they are making Tesla look like a peanut.
The stock price of Builders FirstSource has increased by more than 1,200% in the past five years, thanks to both organic growth and acquisitions. Over the same timeframe, Tesla, which garners far more attention, has increased by “only” 900%.
Later this month, Builders FirstSource will become even more prominent when it becomes a part of the esteemed S&P 500 index. The answer seems to be a strong yes for investors who are asking if the stock still has potential for further growth.
Builders FirstSource: The Backbone Powering America’s Housing Boom
Even though it isn’t well-known, Builders FirstSource is a vital supplier and distributor of products needed in home construction and restoration.
Our company offers a wide variety of products to meet the needs of homebuilders. From windows and doors to timber, drywall, and worktops, we’ve got you covered. It has a foothold in 89 of the sunbelt’s most desirable real estate regions because to its 570 locations in 43 states.
The growth rate of Builders FirstSource has been around 26% every year since 2017. A large $2.6 billion merger in 2020 and fourteen smaller deals in the previous two years are among the purchases that have contributed to this growth.
Thanks to these acquisitions, Builders FirstSource is now able to serve customers in more regions and offer a wider variety of products. And the company’s cash flow is still plenty to reward shareholders, even with all the mergers and acquisitions.
Spending $4.4 billion on share repurchases over the previous two years has reduced Builders FirstSource’s float by 25% since mid-2022.
Why This Stock Could Keep Crushing the Market
From the perspective of Builders FirstSource, the house construction boom is far from over. Management recently presented their expectations to investors, which call for a 9% increase in yearly sales and a 12% increase in adjusted EBITDA through 2026.
The optimism of Builders FirstSource is understandable. The homebuilding industry presents a massive opportunity, as it spends over $110 billion annually on supplies and materials for the construction of single-family homes.
Construction supplies for single-family homes account for 11% of Builders FirstSource’s business, while the company’s share in the multifamily and renovation markets is less than 2%, although its phenomenal growth.
There is a projected 3.5 million unit deficit in the US housing market, which should keep demand for new development high for the foreseeable future. Plus, Builders FirstSource is in a prime position to profit because it is one of the biggest distributors of construction materials in the country.
S&P 500 Inclusion Could Drive More Gains
On December 19th, Builders FirstSource will become a part of the S&P 500, which means that demand will rise when index funds rebalance their portfolios. However, the foundation of the company is a stronger argument in favor of purchasing.
With a well-oiled distribution network and an extensive product catalog, Builders FirstSource services clients all throughout the country.
When compared to lesser providers, its national size offers unrivaled consistency and reliability. Builders FirstSource has an additional benefit with their online portal that allows for design, customization, and procurement.
Builders FirstSource offers pure-play exposure to the US housing market without recommending specific homebuilder stocks, making it an attractive option for investors hoping to profit from the country’s structural housing shortage.
The combination of this fast-growing stock’s index inclusion, dominant market position, and potential for shareholder return makes it a very attractive proposition at the moment.