NEW YORK (TheStreet) -- Trex Co (TREX - Get Report) shares are up 8% to $29.25 in early market trading on Tuesday after being upgraded to "buy" from "hold" by analysts at Stifel Nicolaus (SF), who set a $37 price target on the wood and plastic composite product manufacturer's shares.
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TheStreet Ratings team rates TREX CO INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:"We rate TREX CO INC (TREX) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Building Products industry and the overall market, TREX CO INC's return on equity exceeds that of both the industry average and the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- TREX CO INC's earnings per share declined by 41.6% 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 increased its bottom line by earning $1.00 versus $0.07 in the prior year. This year, the market expects an improvement in earnings ($1.22 versus $1.00).
- 41.70% is the gross profit margin for TREX CO INC which we consider to be strong. Regardless of TREX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TREX's net profit margin of 12.21% compares favorably to the industry average.
- You can view the full analysis from the report here: TREX Ratings Report