There's never been a better time to be an eco-friendly home improvement company, like our stock to buy today.
Consider these figures...
U.S. home equity has reached a record $15.5 trillion, according to the St. Louis Federal Reserve, with a record $6 trillion of it available to be spent.
According to Harvard University's Joint Center for Housing Studies, more than 80% of homes in the United States are over 20 years old, and more than 40% are over 50 years old.
Seniors, who hold nearly half of the country's home equity, have overwhelmingly decided to age in place. That means they're putting their available equity into improvements rather than new homes.
As a result, the home improvement market has been one of the most reliable growth sectors since the Great Recession, growing from $277 billion in 2010 to $460 billion in 2018.
And according to Global Market Insights, the global home improvement market is expected to rise from $800 billion in 2018 to $1.12 trillion by 2025.
Best of all for our pick, a major driver in that growth is the trend toward environmentally friendly construction.
So we've got a company that isn't just riding industry growth, but capturing market share at the same time.
That's borne out by this firm's organic revenue growth, which clocks in at a 15% compound annual growth rate.
And according to at least one key metric, it's due for short-term gains of more than 50%.
That means you'll want to get your shares before they take off.
This Pioneer in Environmentally Friendly Building Materials Has Become the Industry's Gold Standard
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Trex Co. Inc. (NYSE: TREX) got its start in the mid-1990s, pioneering a new way to make wood decking without cutting down any trees.
In fact, after a quarter of a century in business, Trex hasn't felled a single tree.
Instead, it uses a combination of recycled wood that would otherwise end up in a landfill and a film made out of used plastic shopping bags.
The result is a product that looks just like traditional wood decking, but is both better for the environment and more affordable.
Consider that a 16x20-foot deck would cost $577 in wood, according to the company's estimates. Trex composite would be more expensive up front, at $1,187 for the basic product and $2,714 for the premium product.
But when you factor in maintenance over 25 years, a wood deck will cost $5,264. That's nearly twice as much as Trex's high-end product and more than four times as much as the basic product, neither of which require any maintenance. In fact, all the company's products come with a 25-year warranty against fading and staining.
Aside from the money saved, that's a lot of time and frustration Trex customers never have to deal with.
Convincing customers of the virtues of composite products might have been an uphill climb when the company first started. But with home improvement trends moving more and more toward green options, Trex has increased sales for nine consecutive years. Its $684 million in sales in 2018 was two and a half times the amount from 2009.
There's still plenty of room for growth, though.
Principia Consulting reports that alternatives to wood will experience above-average growth through at least 2020. And every time composite's market share - currently at 17% - jumps one percentage point, it represents $50 million in added sales for Trex.
That's because Trex is pretty much universally recognized as the gold standard of wood-alternative decking products. Surveys by both PRODUCTS and Builder magazine have named Trex the most preferred brand in decking. Green Builder magazine has named it the greenest decking brand for eight years in a row. And Trex has won Best of Houzz design awards for five straight years.
And with multiple trends - including low housing supply, baby boomers aging in place, and green building - all converging in Trex's favor, this stock is poised for supercharged growth.
Now Is the Time to Buy TREX
TREX has experienced some volatility recently with the rest of the market. But overall, it's been on a strong run. Shares are trading around $77, up from $53.61 on Christmas Eve. And over the last five years, the stock has performed five times better than the S&P 500.
But don't think this company is going to slow down anytime soon.
Trex is coming off five straight earnings beats, surpassing expectations by 19.4% in the most recent quarter. According to FactSet, sales are projected to rise by double-digit percentages in each of the next two years, and earnings per share (EPS) is projected to rise through at least 2022.
Even before you factor in that future growth, trailing price/earnings-to-growth suggests TREX shares may be undervalued by 34%.
All this means that this is a stock you can buy now and enjoy the gains for years to come.
And if you're looking for more ways to profit, we've got you covered...
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About the Author
Stephen Mack has been writing about economics and finance since 2011. He contributed material for the best-selling books Aftershock and The Aftershock Investor. He lives in Baltimore, Maryland.