FBR Capital Downgrades Trex (TREX) to Market Perform on Valuation
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FBR Capital downgraded Trex (NYSE: TREX) from Outperform to Market Perform and maintains a $61 price target, citing valuation.
Analyst Alex Rygiel commented, "We are downgrading Trex Company to Market Perform from Outperform given the current valuation. The stock is up 84% year to date vs. S&P 500 up 8%, and at $70.14, trades at 26x our 2017 EPS estimate and 14x our 2017 EV/EBITDA estimate, both of which are significant premiums to the peer group averages. Our price target remains $61, which represents 22.5x our 2017 EPS estimate, a 30% premium to the building materials peer group average. We continue to believe that TREX is well positioned to benefit from the overall expected growth in the decking market, as well as market share gains from the industry's conversion from wood to composite decking. As well, we believe TREX has a superior product with strong brand recognition, leading market share of a growing market, and leadership that has a strong track record of creating value for its shareholders. However, given the current valuation, we believe the risk/reward is less attractive."
Shares of Trex closed at $70.14 yesterday.
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