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jurajholik

BLDR (Long) - lovely chart, lovely fundamentals

Long
Builders FirstSource, Inc. (NYSE:BLDR)  
jurajholik  
NYSE:BLDR   Builders FirstSource, Inc.
Trend Analysis Technical Indicators Fundamental Analysis investing trading inflation Commodities housing_market breakout
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trendanalysis indicator fundamental investing trading inflation commodities housing_market breakout
Fundamentals
  • Builders FirstSource is in a robust financial situation and very cheaply valued (P/E = 4.6, P/S = 0.6)
  • Since the start of 2011, its revenue has tripled and earnings grew by almost 900%! Even last year when the market was puking, its earning grew by 60%
  • Their profitability is also good with ROE = 55.4% (Industry = 17.9%) and net profit margins at 12.5%
  • The stock is very much tied to the housing sector (which is also the main caveat), so if the housing market were to absolutely fall off the cliff (which is not completely unlikely), the stock would suffer. However, estimates already show BLDR's earnings falling in the next two years (meaning they have already been priced) and the stock is still rising, suggesting a lot of internal strength
  • Additionally, the managers announced a share buyback program and we might see them buying 10% of the public shares by the end of 2023, which would serve as a strong tailwind for the stock price
  • However, be mindful of the housing market (I suggest watching the chart of house builders - ticker: XHB)

Technicals
  • Technicals look like from a textbook
  • On a weekly we can see a massive rounding base, suggesting a long-term accumulation; the break was not the cleanest, but the price action of the last few days suggest a follow-through in price
  • Relative strength to the overall industry is also pretty impressive and the stock clearly outperforms the rest of its industry

Trade
  • The stock has gone a bit further from the breakout point, but it pulled back today and it is yet not too far as for it to be unprofitable to enter
  • As a stop-loss, I would use the most recent low on a daily
  • The stock seems very suitable for a short-term trade as well as a longer term investment
  • As i mentioned before, be mindful of the housing market and commodity prices (lumber, copper etc.). The stock is correlated to both

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