by Leslie N. Masonson, MBA
TopBuild Corp. (BLD:NYSE), headquartered in Daytona Beach, Florida and incorporated in 2015 boasts a 13,119 person workforce. The company was previously known as Masco SpinCo Corp with a name change in 2015. Their main business focuses on two market segments: installation and specialty distribution. Other areas of products and services include: pre-construction plans, inspection services, diagnostic testing and home inspection services.
The company’s customers include single and multiple dwelling home builders, commercial contractors, remodelers and gutter contractors. Operating in the U.S. and Canada, it maintains about 230 branches and 180 distribution centers. The company has acquired six companies in the thirteen-month period ending in January 2023.
The stock hit its first 2023 high on June 7, closing at $228.54, and since then has added another $15 per share. Previously, the stock’s all-time high was reached on November 26, 2021 at $280.50, while its high for 2023 was hit intra-day this past Friday (June 16, 2023) at $246.84. So far, in 2023 the stock price has advanced 55.5% compared to 14.9%for the S&P 500.
The general Building Sector (composed of ten industry components) is ranked #1 out of 41 sectors. This sector had the highest VST of all sectors at 1.09, as well as the highest Relative Timing (RT at 1.22). BLD is ranked 4th in the Building Products/Misc. category out of 41 stocks, and 7th in the general Building Sector category out of 148 companies. The number one rated company in the latter grouping is Sterling Infrastructure (STRL) which I highlighted in a March 14, 2023 blog post. Since then, STRL has advanced 32.2%, quite a robust performance.
Focusing on the 222 industries tracked by VectorVest Building (Products/Misc.) was ranked #36 so it is no surprise the BLD has relatively high rankings as well. Average daily trading volume of 217,000 shares makes it liquid for both investors and traders to get decent price fills on trades. The company does not pay a dividend which would disappoint conservative investors.
BLD Has Above Average VectorVest Scores, is Undervalued, in a Top-ranked Sector, and Gained 55.5% This Year – All Positive Attributes
How did this stock catch my attention among the 9,117 tracked by VectorVest? Well, I kept seeing the building sector among the best performers in the Sector Viewer. On June 16, this sector was ranked #1 by VST (Value, Safety, and Timing). Just a month earlier on May 16 that sector was ranked #1, on April 17 it was ranked #4, and on March 16 ranked #1 again.
Thus, it has been a consistent #1 performer in three of the last four months. That type of solid performance can result in big profits for astute and observant investors. I then went to StockViewer and found BLD as one viable stock in that sector.
VectorVest’s s key metrics for BLD are as follows:
- Very Good Upside Potential: The Relative Value (RV) rating focuses on a stock’s long-term, three-year price appreciation potential. The current RV rating for BLD is 1.38 which is well above average on a scale of 0.00-2.00. The current stock price is $243.28, while VectorVest pegs its value at $303.60.
- Good Safety: The Relative Safety (RS) rating is based on the company’s business longevity, financial predictability/consistency, debt-to-equity ratio, and additional risk parameters, including price volatility. Its RS rating of 1.17 is slightly above average, indicating slightly above-average risk.
- Excellent Timing: The Relative Timing (RT) rating focuses on the price trend over the short, medium, and long term. The components include price direction, dynamics, and price magnitude of price changes over daily, weekly, quarterly, and yearly comparisons. BLD has an exceedingly high RT rating of 1.52 compared to the average 1.02 RT of all the stocks in the database which means that the stock has been much better than average over multiple timeframes.
- Fair Comfort Index: This index measures the consistency of a stock’s long-term resistance to severe and lengthy corrections. This index compares the individual stock to the fluctuation of the VectorVest Composite price that is measured on a scale of 0 to 2.00. At a level of 0.90, BLD’s rating is below average. Therefore, this stock is more suited for aggressive than conservative investors.
- Very Good Growth Rate (GRT): BLD’s 18% forecasted growth rate is measured over a forecasted three-year period. This fundamental factor is calculated in the VectorVest software, so you don’t have to do the work. The chart below highlights the multi-year positive earnings trend which has been rising steadily over time.
- Very Good VST Score: The VST Master Indicator ranks 9,117 stocks from high to low and brings stocks with the highest VST scores to the top of the list. BLD’s VST is 1.37 which is considered a high score. Using VST enables users to identify stocks that are performing much better than average, as well as those performing much worse than average. Clearly, NSIT falls in the former category.
With its solid metric ratings, this stock can be added to aggressive investors’ watchlists. Following its impressive 22% price surge over the past dozen days, potential buyers should exercise caution and wait for a pullback before considering a purchase.
It’s worth noting, however, that the stock’s ascent has been steady and gradual, rather than an abrupt parabolic move. This gradual progression suggests that the stock may continue along this trajectory in the foreseeable future. As a result, investors should use their favorite technical tools to determine a suitable buy point that aligns with their risk tolerance before committing any capital.
Before buying shares, it is crucial to ensure that several conditions are met. Firstly, the stock price should not fall below $234. Additionally, the MACD (Moving Average Convergence Divergence) indicator should continue its positive trajectory.
Moreover, the daily trading volume should exceed 250,000 shares, ensuring adequate liquidity. Also, RT should remain above 1.00, further affirming the stock’s strength. Currently RT is at a very healthy 1.52. Lastly, investors should pay attention to the overall VectorVest “Confirmed Calls” timing signal, which turned “bullish” on June 8, suggesting a favorable near-term outlook for the general market.
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