US Housing And Omni Retail Expansion Will Foster Value

Key Takeaways

• Stable recurring revenue is supported by strong demand in home repair, efficient e-commerce integration, and successful retailer partnerships driving steady growth.
  
• Diversified supply chain, proactive tariff management, and strategic acquisitions enhance operational resilience and support margin expansion.
  
• Demand softness, margin pressures from retail dependency, acquisition integration challenges, and high debt collectively threaten long-term profitability and financial flexibility.

Catalysts

Provides hardware-related products and related merchandising services in the United States, Canada, Mexico, Latin America, and the Caribbean.

• Continued growth in residential repair and remodeling spend, driven by the aging US housing stock, is expected to provide Hillman with a stable and recurring revenue base, supporting steady top-line growth regardless of fluctuations in new home sales or broader economic cycles.
  
• Hillman's expansion in omni-channel retailing and e-commerce integration-boosting direct-to-store delivery capabilities and proprietary digital inventory management-positions the company to capture a wider addressable market and increase efficiency, which should positively impact both revenue and margins.
  
• Ongoing execution of the dual faucet sourcing strategy (multi-country supply diversification) and proactive tariff management are increasing operational resilience, lowering tariff exposure, and supporting gross margin stabilization, even amid geopolitical or regulatory headwinds.
  
• Investments in automation, category management, and proprietary/professional brands are enhancing operational efficiencies and stickiness with key retail partners, which should gradually drive margin expansion and higher recurring earnings.
  
• Hillman's track record of bolt-on acquisitions like Intex continues to broaden its product portfolio and deepen retailer relationships, supporting incremental inorganic revenue growth and further leveraging scale advantages in a consolidating industry.

Hillman Solutions Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Hillman Solutions's revenue will grow by 5.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.4% today to 5.6% in 3 years time.
• Analysts expect earnings to reach $100.6 million (and earnings per share of $0.52) by about August 2028, up from $21.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.7x on those 2028 earnings, down from 94.1x today. This future PE is greater than the current PE for the US Machinery industry at 23.8x.
• Analysts expect the number of shares outstanding to grow by 0.72% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.94%, as per the Simply Wall St company report.

Hillman Solutions Future Earnings Per Share Growth

Risks

• Continued volume declines in core markets despite strong pricing actions and new business wins suggest potential underlying weakness in demand; if this persists, it could directly impact long-term revenue growth.
  
• Heavy reliance on large retail partners and customer concentration exposes Hillman to possible pricing pressure and reduced leverage in negotiations, which may compress net margins and limit revenue expansion.
  
• Ongoing tariffs, supply chain disruptions, and the fluid nature of global trade policy could introduce persistent cost uncertainties, challenging Hillman's ability to manage gross margins and operating earnings over time.
  
• Integration of recent acquisitions (such as Intex), which have lower gross margins than Hillman's legacy business, may structurally dilute company-wide margins and reduce overall profitability if organic growth fails to offset the effect.
  
• High debt levels from past acquisition-driven expansion may constrain Hillman's ability to invest in future innovation or bolt-on M&A, while increasing exposure to interest rate risk and potentially slowing long-term earnings growth.

Valuation

• The analysts have a consensus price target of $11.906 for Hillman Solutions based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $10.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.8 billion, earnings will come to $100.6 million, and it would be trading on a PE ratio of 30.7x, assuming you use a discount rate of 8.9%.
• Given the current share price of $10.35, the analyst price target of $11.91 is 13.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.