IBD Stock Analysis
- Just below 48.89 buy point
- Earnings, revenue growth accelerating
- Relative strength line still well off highs
Industry Group Ranking
* Not real-time data. All data shown was captured at
1:58PM EDT on
U.S. homebuilding hit a recent high last month, with housing starts jumping 19.4% to a seasonally adjusted annual rate of 1.739 million units. Economists polled by Reuters saw housing starts rising to 1.613 million units in March.
But as housing starts pick back up, prices for raw materials like lumber have skyrocketed.
Chicago-based Azek offers a sustainable solution for homebuilders and businesses. It supplies nonwood decking, trim and other outdoor supplies from recycled material for the residential and commercial markets.
Overall, the housing market has stood up well during the Covid-19 pandemic and homebuyers are facing a very competitive market as inventory fell to a record low earlier this year. The pandemic has skewed what homebuyers are looking for as many opt for larger houses with more amenities for enjoying the outdoors outside urban centers.
Both Azek and Trex (TREX), which vies with Azek in the residential market, are setting up potential buying opportunities.
More broadly, the overall housing sector is faring well, from homebuilders to home improvement chains and home furnishing retailers.
Azek Stock Technical Analysis
Shares rose 2.4% to 48.61 on the stock market today. Azek stock is on the cusp of a 48.89 conventional buy point. Aggressive investors could have started an initial position at 46.55.
Azek stock came public in mid-2020 at $23 a share.
Trex stock is trying to complete a double-bottom base with a 107.74 buy point. Shares rose 1.6% to 104.98.
Azek stock is currently finding support and bouncing off its 10-week line after dipping below. Azek’s drop below its 10-week line was in lower weekly volume while the rebound has been in higher volume, a sign of strength.
However, the relative strength line, which tracks performance vs. the S&P 500 index, is off recent highs, a sign of weakness. But it’s moving higher in the past couple of tweeks.
Still, institutional investors are buying into Azek. Top funds like Fidelity Contrafund and Lord Abbett are major buyers and the stock has a B+ Accumulation/Distribution Rating, which shows more buying than selling institutional investors over the last 13 weeks.
Azek Earnings Soar
Azek earnings growth has accelerated for the past two quarters, moving from -31% to +164% and +650%. Sales growth picked up from 1% to 22% and 28%.
Azek stock has a 98 Composite Rating out of 99 and a best-possible EPS Rating of 99. The Composite Rating compiles scores on key fundamental and technical metrics: earnings and sales growth, profit margins, return on equity, and relative price performance. Investors should focus on stocks with a Composite Rating of 90 or higher.
Azek is ranked No. 2 in IBD’s Building-Construction Products/Miscellaneous.
Azek Builds Strong Earnings Growth Rate
The company’s three-year EPS growth rate stands at 26% and its three years sales rate is 16%. Investors should look at stocks with at least 25% growth rates.
The company was profitable in its first report since going public in June 2020, a rarity. Earnings jumped over 600% when it reported Q1 results in February.
Follow Gillian Rich on Twitter for investing news and more.
YOU MIGHT ALSO LIKE: