ferrantraite In March, I believed that shares of TopBuild ( NYSE: BLD ) , a premium insulation play, had warmed up. I see TopBuild as a strong operator, which benefits from secular tailwinds in the housing market, driving increased demand for insulation and adjacent products. The company has been combining organic growth with bolt-on acquisitions, driving impressive sales and margin pressure.
Unfortunately, price expectations have increased quite a bit, too much to get back involved here. TopBuild - A Big Performer Originally part of Masco Corporation ( MAS ) , TopBuild was spun-out of the company back in 2015, at the time just a $1.7 billion buyer, installer and distributor of insulation products.
A $20 stock was set to enjoy a huge boom, amidst increasing environmental concerns, as well as higher utility bills driving the need and economic sense to install better insulation. Fast forwarding seven years in time, the company had essentially tripled sales to $5 billion in 2022, while growing EBITDA margins to the high-teens, close to a billion in dollar terms. That was all about to change, as higher interest rates caused a downer on the 2023 outlook with the company originally seeing sales down towards $4.
8 billion, with EBITDA seen around $865 million. This could weigh on the earnings power of the business to the tune of $2-3 per share. Nonetheless, earnings close to $20 per share could be expected in 2023, which looks quite interesting with shares trading in a $150-$200 rang.
