10 Most Volatile Stocks To Buy Right Now

4. Builders FirstSource (NYSE:BLDR)  

Number of Hedge Fund Investors: 59  

Beta: 2.06

Builders FirstSource (NYSE:BLDR) is one of the largest suppliers of building materials, prefabricated components, and value-added services in the US for residential and commercial construction.

Despite its long-term growth potential, the company faces challenges due to a slowdown in single-family housing starts and affordability issues. In Q2, Builders FirstSource’s (NYSE:BLDR) net sales decreased 1.6% year-over-year to approximately $4.5 billion. The decline was driven by a downward trend in multifamily, which offset growth from single-family, repair and remodel, and acquisition. The company’s adjusted EBITDA margin contracted 2% to 15%, and adjusted net income margin fell 2.5% to 11%. The company’s diluted adjusted EPS fell 22% year-over-year to $14.59.

Over the past three years, BLDR’s net sales have been volatile. In 2022, net sales grew 14.2% to $22.7 billion, driven by acquisition and core organic sales growth. However, in 2023, net sales fell 24.8% year-over-year to $17.1 billion due to a decline in core organic sales and commodity price deflation. The decrease in net sales was also driven by a slowdown in single-family housing starts.

Builders FirstSource (NYSE:BLDR) operates in a highly fragmented market, which provides opportunities for growth and expansion. Builders FirstSource’s (NYSE:BLDR) market share is currently 11% in the single-family end market and 2% in the multifamily end market. The company has already completed five acquisitions in the first two quarters of 2024, which are expected to expand its market presence, market reach, manufacturing capabilities, and service offerings.

According to realtor.com, the US housing gap has been widening, with a cumulative gap of 2.5 million units between 2012 and 2023. This housing gap situation is expected to create long-term opportunity for Builders FirstSource (NYSE:BLDR), as the under-building of houses and consistent growth in household formation combined with low home inventory is expected to create demand for more homes to be built.