Stock Analysis

Those who invested in Beacon Roofing Supply (NASDAQ:BECN) three years ago are up 99%

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NasdaqGS:BECN
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By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, the Beacon Roofing Supply, Inc. (NASDAQ:BECN) share price is up 99% in the last three years, clearly besting the market return of around 25% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 9.7%.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out the opportunities and risks within the US Trade Distributors industry.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Beacon Roofing Supply moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
NasdaqGS:BECN Earnings Per Share Growth November 28th 2022

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Beacon Roofing Supply's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Beacon Roofing Supply has rewarded shareholders with a total shareholder return of 9.7% in the last twelve months. Notably the five-year annualised TSR loss of 1.4% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Beacon Roofing Supply better, we need to consider many other factors. For example, we've discovered 2 warning signs for Beacon Roofing Supply that you should be aware of before investing here.

Beacon Roofing Supply is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

What are the risks and opportunities for Beacon Roofing Supply?

Beacon Roofing Supply, Inc., together with its subsidiaries, distributes residential and non-residential roofing materials, and complementary building products to contractors, home builders, building owners, lumberyards, and retailers.

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Rewards

  • Trading at 28.9% below our estimate of its fair value

  • Earnings grew by 104.2% over the past year

Risks

  • Earnings are forecast to decline by an average of 0.6% per year for the next 3 years

  • Debt is not well covered by operating cash flow

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Beacon Roofing Supply

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