Stephens Analyst Sees 17% Upside In Trex

  • Stephens analyst Trey Grooms upgraded Trex Company Inc TREX to Overweight from Equal Weight and raised the price target to $120 (implying an upside of 17%), from $111. 
  • Grooms states that Trex is the leader of the composite decking industry, and yesterday's announcement to significantly expand capacity "will further cement its long-term growth prospects and leading market position."
  • The analyst says that while 2021 will likely bring growth deceleration on tough compares, the long-term demand picture for Trex "is compelling." 
  • The company is not immune to cost inflation, but is the best positioned given its high use of recycled content, notes Grooms.
  • Recently, Trex announced plans to develop a new multi-faceted production site in Little Rock, Arkansas. The company expects to invest an estimated $400 million over the next five years to develop the new Arkansas site, funded primarily through ongoing cash generation.
  • Price Action: TREX shares closed higher by 4.79% at $102.70 on Wednesday.
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