27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Building materials company Eagle Materials, Inc. (NYSE:EXP) is likely to benefit from a host of catalysts over the near-to-medium-term, making Longbow Research incrementally positive on the stock.
The Analyst
ENTER TO WIN $500 IN STOCK OR CRYPTO
Enter your email and you'll also get Benzinga's ultimate morning update AND a free $30 gift card and more!
Longbow analyst Garik Shmois upgraded Eagle Materials from Neutral to Buy, with a $133 price target, suggesting roughly 40-percent upside for the shares.
The Thesis
Pricing for Eagle Materials is tracking 200 basis points ahead of Longbow's earlier estimate, Shmois said in a Friday note, citing a wallboard survey conducted by the sell-side firm.
The higher prices are offsetting lower first-quarter volumes that were negatively impacted by hurricanes, prepurchasing ahead of price increases and bad weather, the analyst said.
Other catalysts that Longbow projects for Eagle Materials include an improvement in cement supply and demand over the next one to two years; potential cement and wallboard consolidation; wallboard cost advantages, optionality around fracking sand profits; and a potential break-up of the company.
The company is a takeout candidate, with the break-up value suggesting average upside to $140, Shmois said.
FREE REPORT: How To Learn Options Trading Fast
In this special report, you will learn the four best strategies for trading options, how to stay safe as a complete beginner, a 411% trade case study, PLUS how to access two new potential winning options trades starting today.Claim Your Free Report Here.
"Based on our recent discussions with investors, it seems like an EXP break-up thesis is gathering more steam."
Eagle Material's net debt/EBITDA is about 1x the estimated EBITDA for 2019, which gives the company leverage to participate in additional cement consolidation or to buy back 11 percent of its stock, the analyst said.
Longbow sees valuation upside, as the shares trade at 8.6x the 2020 EBITDA estimate — below the 10-year average of 10x.
"Improving wallboard and cement fundamentals, along with the [sum-of-the-parts analysis] and breakup valuation support several catalysts for share price appreciation," Shmois said.
The Price Action
Eagle Materials shares were down about 2 percent over the past year until Thursday.
The stock was trading up 5.18 percent in the Thursday afternoon session.
Related News:
R.F. Lafferty: U.S. Silica Offers About 45% Upside Potential
A Pair Trade In Building Materials From B. Riley FBR: Buy Trex, Neutral On BMC
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.