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Category: TopBuild (BLD)
Date: 3 November 2020 Stock price of TopBuild: $160.14 We take a look at the 3rd quarter 2020 earnings report of TopBuild, a fortune 1000 company that supplies and installs insulation as well provide building material products. The group reported revenues of $697.2 million and net income of $69.9 million for the quarter.
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Jerry Volas, Chief Executive Officer - We are pleased with our overall results that included strong adjusted operating and EBITDA margins. Our team continues to do an outstanding job of generating profitable growth. Sales at TruTeam were adversely impacted by our commercial business where some projects have been delayed due to COVID-19 safety protocols. "
More About TopBuild (BLD)
TopBuild Corp., a Fortune 1000 Company headquartered in Daytona Beach, Florida, is a leading installer and distributor of insulation and building material products to the U.S. construction industry. We provide insulation and building material services nationwide through TruTeam®, which has close to 200 branches, and through Service Partners® which distributes insulation and building material products from over 75 branches. We leverage our national footprint to gain economies of scale while capitalizing on our local market presence to forge strong relationships with our customers
Overview of TopBuild's 3rd quarter 2020 earnings
Third Quarter Financial Highlights
(unless otherwise indicated, comparisons are to the quarter ended September 30, 2019)
(unless otherwise indicated, comparisons are to the quarter ended September 30, 2019)
- Net sales increased 2.2% to $697.2 million, driven by increased volume and sales from acquisitions.
- Gross margin increased 210 basis points to 28.4%.
- Operating profit was $101.5 million, compared to operating profit of $80.4 million. On an adjusted basis, operating profit was $101.7 million, compared to $80.6 million, a 26.2% improvement.
- Operating margin, both reported and adjusted, was 14.6%, up 280 basis points.
- Net income was $70.0 million, or $2.11 per diluted share, compared to $55.0 million, or $1.60 per diluted share. Adjusted income was $69.6 million, or $2.10 per diluted share, compared to $52.7 million, or $1.53 per diluted share.
- Adjusted EBITDA was $119.2 million, compared to $98.0 million, a 21.6% increase, and adjusted EBITDA margin improved 270 basis points to 17.1%.
- At September 30, 2020, the Company had cash and cash equivalents of $315.3 million and availability under its revolving credit facility of $389.6 million for total liquidity of $704.9 million.
TopBuild management commentary on their 3rd quarter 2020 earnings
DAYTONA BEACH, Fla., Nov. 03, 2020 (GLOBE NEWSWIRE) -- TopBuild Corp. (NYSE:BLD), a leading installer and distributor of insulation and building material products today reported results for the third quarter ended September 30, 2020.
Jerry Volas, Chief Executive Officer, stated, “We are pleased with our overall results that included strong adjusted operating and EBITDA margins. Our team continues to do an outstanding job of generating profitable growth. Sales at TruTeam were adversely impacted by our commercial business where some projects have been delayed due to COVID-19 safety protocols.
“Looking ahead, we are bullish on the overall fundamentals of our end markets and our ability to leverage our size and scale to drive market share.”
Jerry Volas, Chief Executive Officer, stated, “We are pleased with our overall results that included strong adjusted operating and EBITDA margins. Our team continues to do an outstanding job of generating profitable growth. Sales at TruTeam were adversely impacted by our commercial business where some projects have been delayed due to COVID-19 safety protocols.
“Looking ahead, we are bullish on the overall fundamentals of our end markets and our ability to leverage our size and scale to drive market share.”
Capital Allocation
Acquisitions
On October 1, 2020, the Company completed the acquisition of Garland Insulating, one of the largest locally owned and operated insulation installation companies in Texas. Garland generated approximately $60 million in revenue for the trailing twelve months ended June 30, 2020.
“Acquisitions continue to be our number one capital allocation priority. Garland Insulating, which has a great reputation, strong customer base and outstanding leadership, is a good example of the type of quality companies we have in our pipeline,” noted Volas. Year-to-date, the Company has announced three acquisitions, which combined, are expected to generate approximately $79 million in annual revenue.
Share repurchases
In the third quarter of 2020, the Company repurchased 57,810 shares at an average price of $155.63 per share. These shares were purchased as part of the Company’s $200 million share repurchase authorization announced on February 26, 2019. As of September 30, 2020, $46 million of the $200 million authorization remained
Acquisitions
On October 1, 2020, the Company completed the acquisition of Garland Insulating, one of the largest locally owned and operated insulation installation companies in Texas. Garland generated approximately $60 million in revenue for the trailing twelve months ended June 30, 2020.
“Acquisitions continue to be our number one capital allocation priority. Garland Insulating, which has a great reputation, strong customer base and outstanding leadership, is a good example of the type of quality companies we have in our pipeline,” noted Volas. Year-to-date, the Company has announced three acquisitions, which combined, are expected to generate approximately $79 million in annual revenue.
Share repurchases
In the third quarter of 2020, the Company repurchased 57,810 shares at an average price of $155.63 per share. These shares were purchased as part of the Company’s $200 million share repurchase authorization announced on February 26, 2019. As of September 30, 2020, $46 million of the $200 million authorization remained
TopBuild (BLD) stock price history over the last 5 years
The image below shows the stock price history of TopBuild (BLD) over the last 5 years. And its been a very good time for TopBuild stockholders. 5 years ago the stock was trading around $29.40 and its currently trading at $160.14. That's a very strong return of 444.70% provided to TopBuild stockholders over the last 5 years.
The stock of TopBuild is currently trading at a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of TopBuild's stock is very positive at this point in time.
The stock of TopBuild is currently trading at a lot closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of TopBuild's stock is very positive at this point in time.
TopBuild (BLD) vs HD Supply (HDS) stock over the last 5 years
The image below shows the stock price performance of TopBuild (BLD) vs HD Supply (HDS) stock over the last 5 years. Both firms are active in the building supplies industry in the USA The summary below shows the stock price return of these two firms over the last 5 years.
The stock of TopBuild has easily outperformed that of HD Supply over the last 5 years.
- TopBuild: 144.70%
- HD Supply: 31.6%
The stock of TopBuild has easily outperformed that of HD Supply over the last 5 years.
Latest stock valuation of TopBuild (BLD)
So based on TopBuild's 3rd quarter 2020 earnings report what do we value their stock at? Based on the 3rd quarter 2020 earnings report our valuation model provides a target price for TopBuild (BLD) at $117.50 a stock. We therefore believe the stock of TopBuild is overvalued at its current price.
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price which in this case is $117.50. Therefore a good entry point into the stock of TopBuild (BLD) would be at $105.80 or below.
Since the stock of TopBuild is trading at well above our suggested entry point into the stock we rate the stock of TopBuild as a sell.
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price which in this case is $117.50. Therefore a good entry point into the stock of TopBuild (BLD) would be at $105.80 or below.
Since the stock of TopBuild is trading at well above our suggested entry point into the stock we rate the stock of TopBuild as a sell.
Next earnings release of TopBuild (BLD)
It is expected that TopBuild will release their 4th quarter 2020 earnings report in early February 2021
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