The Hidden Upside Potential in Beacon Roofing Supply, Inc. (BECN)

If so, it would be a mistake! Pricing and sales may be down on a yearly basis but they are up against some very tough comparisons (remember the pull forward effect and the re-roofing activity created by Katrina?) last year.  BECN’s management argued that sequential pricing was up sequentially, and by my reckoning that is three quarters in a row. Another good sign.

Where Next for Beacon Roofing Supply?

Analyst estimates are for $1.81 in earnings, and management declared that they were comfortable with these numbers. The game changer will be if BECN manages to get the planned price rises in Residential to stick. Indeed, the company spent significant sums on inventory in order to take advantage before industry prices rise. BECN reported that January was a good month with its order backlog growing, and there is a real sense that any weakness in the winter was temporary.

With a current stock price of $37, the forward PE is over 20.4, which looks a bit pricey to me. It isn’t ‘pricey’ if you start baking in some increased pricing in Residential Roofing pricing. I’m willing to do this but not without some margin of safety. Another one for the monitor list.

The article The Hidden Upside Potential in This Stock originally appeared on Fool.com and is written by Lee Samaha.

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