Today's Strong And Under The Radar Stock: Trex (TREX)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Trex ( TREX) as a strong and under the radar candidate. In addition to specific proprietary factors, Trade-Ideas identified Trex as such a stock due to the following factors:

  • TREX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $9.3 million.
  • TREX is making at least a new 3-day high.
  • TREX has a PE ratio of 34.
  • TREX is mentioned 1.94 times per day on StockTwits.
  • TREX has not yet been mentioned on StockTwits today.
  • TREX is currently in the upper 20% of its 1-year range.
  • TREX is in the upper 35% of its 20-day range.
  • TREX is in the upper 45% of its 5-day range.
  • TREX is currently trading above yesterday's high.

'Strong and Under the Radar' stocks tend to be worthwhile stocks to watch for a variety of factors including historical back testing and price action. Market technicians refer to such stocks as being in an accumulation phase before a mark-up and peak. Traders and hedge funds have frequently found that these types of stocks continue to build a solid price base and then ultimately spike higher and peak when others 'discover' how good the stock is performing. By leveraging the social discovery aspect of StockTwits we are highlighting stocks that don't currently receive much attention from retail investors, but we suspect may soon garner more attention.

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More details on TREX:

Trex Company, Inc. manufactures and distributes wood/plastic composite products, and related accessories primarily for the residential and commercial decking, and railing applications in the United States. TREX has a PE ratio of 34. Currently there are 2 analysts that rate Trex a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Trex has been 311,500 shares per day over the past 30 days. Trex has a market cap of $1.6 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 2.75 and a short float of 8.9% with 16.09 days to cover. Shares are up 20.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Trex as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 20.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 1.10, which illustrates the ability to avoid short-term cash problems.
  • 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.
  • 42.95% is the gross profit margin for TREX CO INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.53% significantly outperformed against the industry average.
  • Powered by its strong earnings growth of 50.68% and other important driving factors, this stock has surged by 61.88% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.

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