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Why Trex (TREX) Hit an All-Time High Today

NEW YORK (TheStreet) -- Trex  (TREX) hit an all-time high of $86.85 on Monday after the wood-alternative products maker announced fourth quarter results that smashed analysts' expectations and announced a stock split.

The company reported earnings of 23 cents a share, 17 cents greater than the Capital IQ consensus estimate of 6 cents a share. Revenue also increased 38.1% year over year to $63.8 million, which surpassed analysts' expectations of $50.48 million; however, Trex issued first-quarter revenue guidance of $115 million, less than the consensus estimate of $128.45 million.

Trex also announced that its board of directors has approved a two-for-one stock split of its common stock. This will take the form of a stock dividend that will be distributed on May 7 to shareholders of record at the close of business on April 7.

"We brought 2013 to a very strong finish," said Chairman, President and CEO Ronald W. Kaplan in the company's statement. "Expanded distribution and dealer demand across the country contributed significantly to sales and are helping us advance a key initiative -- increasing market share. Our best-in-class high-performance product platform, coupled with our recently revised pricing strategy, is being well received in the marketplace. Our robust sales increase fell to the bottom line, producing an impressive $6.0 million improvement over underlying net income in the 2012 quarter."

Must ReadTrex Company Fourth-Quarter 2013 Net Sales Increase 38% To $63.8 Million

TheStreet Ratings team rates TREX CO INC as a "hold" with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TREX CO INC (TREX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, premium valuation and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TREX's revenue growth has slightly outpaced the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 4.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • TREX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
  • TREX CO INC's earnings per share declined by 5.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TREX CO INC turned its bottom line around by earning $0.14 versus -$0.79 in the prior year. This year, the market expects an improvement in earnings ($2.67 versus $0.14).
  • The gross profit margin for TREX CO INC is currently extremely low, coming in at 8.18%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -20.65% is significantly below that of the industry average.
  • You can view the full analysis from the report here: TREX Ratings Report

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