Builder’s First Source (BLDR – (Free Report) recently appeared on the list of most searched stocks on Zacks.com. Therefore, you may need to consider some important factors that may influence the stock’s performance in the near future.
This construction supply company’s stock has moved -13.7% over the past month versus a -2.6% change in the Zacks S&P 500 Composite Index. The Zacks Building Products – Retail industry, which Builders FirstSource belongs to, has declined 9% in the period. The key question here is where the stock is likely to go in the short term.
While media releases and rumors about significant changes in a company’s business prospects typically cause its stock to “trend” and lead to immediate price movements, there are some fundamentals that ultimately govern buy-and-hold decisions. There are always facts.
Regarding revisions to performance forecasts
At Zacks, we prioritize evaluating changes in company earnings estimates rather than focusing on anything else. This is because we believe that the fair value of a stock is determined by the present value of its future income stream.
Essentially, we look at how the sell-side analysts covering a stock are revising their earnings estimates to reflect the impact of the latest business trends. And as a company’s earnings expectations rise, so will the fair value of its stock. If the fair value is higher than the current market price, investors will be more willing to buy the stock, causing the price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Builders FirstSource is expected to post earnings of $2.40 per share for the current quarter, representing a year-over-year change of -18.9%. Over the past 30 days, the Zacks Consensus Estimate has changed -3%.
The consensus earnings estimate for the current fiscal year of $13.84 represents a -5.1% change from the prior year. This estimate has changed -1.3% over the past 30 days.
Next year’s consensus earnings estimate of $15.44 represents a +11.6% change from what Builders FirstSource was expected to report a year ago. Over the past month, the forecast has changed by -1.8%.
The Zacks Rank, a proprietary stock evaluation tool with an impressive, outside-audited track record of impressive results, leverages the power of earnings estimate revisions to be a more conclusive indicator of a stock’s short-term price performance. . The magnitude of the recent change in consensus estimates, as well as three other factors related to earnings expectations, earns Builders FirstSource a Zacks Rank #2 (Buy).
The chart below shows the company’s consensus EPS estimate over the next 12 months over time.
12 months EPS
Revenue growth forecast
Earnings growth is arguably the best indicator of a company’s financial health, but nothing will happen if a company can’t grow its revenue. After all, it’s nearly impossible for a company to increase profits over a long period of time without increasing revenue. Therefore, it’s important to know a company’s earnings growth potential.
For Builders FirstSource, the current quarter’s consensus revenue estimate of $3.78 billion represents a year-over-year change of -2.6%. Forecasts of $17.97 billion and $18.86 billion for the current and next fiscal year represent changes of +5.1% and +5%, respectively.
Last reported results and surprising details
Builders FirstSource reported revenue of $4.15 billion in its last reported quarter. This represents a -4.7% year-over-year change. EPS for the same period was $3.55, compared to $3.21 a year ago.
The reported earnings represent a surprise of +3.42% when compared to the Zacks Consensus Estimate of $4.01 billion. EPS surprise was +31.48%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company has surpassed consensus revenue estimates three times during this period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a key determinant of future stock performance.
The present value of a company’s valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), and the past value of your company Comparing a company to its peers based on these parameters will help you see how reasonable its stock price is. You can get a good idea of what
The Zacks Value Style Score (part of the Zacks Style Scores system) pays close attention to both traditional and non-traditional valuation metrics and rates stocks from A to F, where A is better than B. , B is better than C, A is better than B, and B is better than C). ), can be very helpful in identifying whether a stock is overvalued, well-valued, or temporarily undervalued.
Builders FirstSource is rated A on this score, meaning it trades at a discount to its peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and much of the other information on Zacks.com, may help you decide whether the market buzz about Builders FirstSource is worth paying attention to. However, the company’s Zacks Rank #2 suggests it has the potential to outperform the broader market in the near term.
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