Why Trex (TREX) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of Trex Company Inc. (TREX) are lower -10.63% to $70.97 on Monday after the company reported a decrease in net sales and net income for the 2014 first quarter.

The company, which manufactures wood and plastic composite products, reported net sales were $100.6 million versus $107.9 million for the 2013 first quarter.

Net income for the first quarter 2014 was $12.3 million, or 73 cents per diluted share, compared with $21.6 million or $1.25 per diluted share from the same period last year.

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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 several positive factors, 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 revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

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

  • The revenue growth greatly exceeded the industry average of 7.4%. Since the same quarter one year prior, revenues rose by 37.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • TREX CO INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TREX CO INC increased its bottom line by earning $2.00 versus $0.14 in the prior year. This year, the market expects an improvement in earnings ($2.69 versus $2.00).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Building Products industry. The net income increased by 517.3% when compared to the same quarter one year prior, rising from -$3.62 million to $15.10 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Building Products industry and the overall market, TREX CO INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 36.46% 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 23.79% significantly outperformed against the industry.
  • You can view the full analysis from the report here: TREX Ratings Report
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