Last Update 23 Jan 26

Fair value Decreased 1.15%

BLDR: Stabilizing Margins And Housing Cycle Trough Set Up Balanced Outlook

Analysts have modestly reduced their fair value estimate for Builders FirstSource to $131.00, reflecting slightly lower margin and growth assumptions. This is partially offset by higher future P/E expectations and a mixed set of recent price target revisions from Barclays, RBC Capital, UBS, and Jefferies.

Analyst Commentary

Recent research on Builders FirstSource reflects a mix of optimism and caution, with price targets adjusted both higher and lower and a range of views on housing demand, end markets, and valuation.

Bullish Takeaways

Bullish analysts highlight that margins are described as stabilized, which supports the view that current earnings levels may be more resilient than investors fear.
Some price targets remain above the revised fair value estimate, suggesting that certain analysts see room for rerating if execution stays on track and end markets improve.
One research note points to Builders FirstSource trading around 11.x 2026 EV/EBITDA at what is characterized as the bottom of the cycle, which these analysts view as an appealing entry point on a medium term basis.
Comments about fundamentals "bottoming" with "good torque" to a recovery reflect a view that operational leverage could support earnings if volumes and pricing conditions improve.

Bearish Takeaways

Bearish analysts cut price targets and remain cautious into early 2026, citing housing affordability as a key headwind that could limit growth in core residential demand.
Repair and remodel activity is expected by some to inflect later in 2026 rather than in the near term, which could delay any meaningful acceleration in revenue momentum.
Nonresidential markets are described as mixed, introducing additional uncertainty around project timing and volumes outside of single family housing.
Key risks highlighted include potential policy changes, interest rate moves, and tariffs, all of which could pressure multiples, earnings power, or both if conditions turn less favorable.

What’s in the News

Builders FirstSource confirmed its 2025 earning outlook, guiding for net sales of US$15.1b to US$15.4b, providing investors with a concrete revenue range to frame expectations for the year (Corporate Guidance).
The company indicated it is actively looking for acquisitions, with management emphasizing a focus on value added products and expansions in what it describes as desirable geographies, supported by what it calls consistent strong free cash flow and a track record of M&A integration (Seeking Acquisitions/Investments).
A previously announced share buyback program showed no repurchases from July 1, 2025 to October 30, 2025, with 0 shares bought for US$0 under the tranche tied to the May 1, 2025 authorization (Buyback Tranche Update).

Valuation Changes

The fair value estimate has edged down slightly from US$132.52 to US$131.00.
The discount rate has moved slightly lower from 9.52% to about 9.35%, implying a modest change in required return assumptions.
Revenue growth has been trimmed marginally from about 2.68% to about 2.66%.
The net profit margin has been reduced from about 4.24% to about 3.96%, reflecting slightly lower profitability assumptions.
The future P/E has risen from about 24.46x to about 25.78x, pointing to a higher valuation multiple applied to forward earnings.

Heavy investment in digital transformation, automation, and sustainable solutions is set to drive margin improvement, efficiency gains, and an expanded addressable market.
Aggressive market consolidation through acquisitions boosts scale, pricing power, and readiness to capture growth as housing demand strengthens.
Prolonged housing market weakness, commodity volatility, slow digital adoption, subdued multi-family demand, and elevated debt exposure collectively threaten growth, margins, and financial flexibility.

Catalysts

About Builders FirstSource

Manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers in the United States.What are the underlying business or industry changes driving this perspective?

The company is investing heavily in digital transformation and value-added solutions (e.g., digital tools, ERP integration, prefabricated components) that are expected to drive higher-margin growth, increase operating efficiency, and strengthen customer relationships as the market recovers, improving both future revenue and net margins.
Chronic housing undersupply and demographic drivers mean that when single-family and multi-family starts eventually rebound, Builders FirstSource's increased footprint and operating leverage from cost control and acquired scale position it to capture outsized revenue growth and margin expansion.
BFS continues to consolidate a fragmented market through strategic M&A, with 35 acquisitions since 2021, expanding its geographic reach, product mix, and pricing power, which is likely to boost long-term top-line growth and operational earnings as cycles normalize.
The shift toward more sustainable and energy-efficient building practices is increasing demand for advanced materials and manufacturing methods-an area where BFS is actively investing-potentially expanding its addressable market, supporting higher margins and enhanced profitability.
Investments in automation and offsite construction capacity, combined with industry-wide labor shortages, position BFS to benefit as builders increasingly adopt prefabricated and digitally-optimized solutions, supporting both revenue growth and operational margin improvement over the long term.

Builders FirstSource Earnings and Revenue Growth

Builders FirstSource Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Builders FirstSource's revenue will decrease by 0.9% annually over the next 3 years.
Analysts assume that profit margins will shrink from 4.7% today to 4.2% in 3 years time.
Analysts expect earnings to reach $684.5 million (and earnings per share of $7.9) by about September 2028, down from $756.4 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.1 billion in earnings, and the most bearish expecting $528.3 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.7x on those 2028 earnings, up from 20.5x today. This future PE is greater than the current PE for the US Building industry at 23.0x.
Analysts expect the number of shares outstanding to decline by 3.94% 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.

Builders FirstSource Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing softness and unpredictability in the single-family housing starts environment-driven by affordability concerns, higher inventories, and sluggish demand-poses significant risk to Builders FirstSource's core business, and could depress revenue growth for extended periods.
High exposure to commodity price deflation and volatility, particularly with OSB and lumber, continues to pressure gross margins and earnings; excess OSB capacity and product substitution trends (e.g., Southern Yellow Pine replacing Canadian spruce) add further revenue and margin risk.
The company's mix shift toward value-added and digitally enabled solutions has delivered margin expansion, but slower-than-expected adoption of digital and technology tools by customers, especially in a tough market, risks limiting future net margin improvement and overall productivity gains.
Multi-family construction remains muted, with long lead times to recovery and a recent history of steep declines; any prolonged weakness here (and persistent slowdowns in residential R&R activity) could further weigh on top-line growth and earnings recovery.
Ongoing high leverage and acquisition-driven growth (with net debt/EBITDA above target) increases financial risk, leaving the company more vulnerable to interest rate spikes, cyclical downturns, and reduced flexibility in capital returns, directly impacting net income and shareholder returns.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $140.316 for Builders FirstSource 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 $158.0, and the most bearish reporting a price target of just $125.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $16.4 billion, earnings will come to $684.5 million, and it would be trading on a PE ratio of 25.7x, assuming you use a discount rate of 8.9%.
Given the current share price of $140.45, the analyst price target of $140.32 is 0.1% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
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.

Have other thoughts on Builders FirstSource?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Turnkey Market Expansion And Share Repurchases Will Drive Future Upside