QXO (QXO): Evaluating the Stock’s Valuation as Roofing Headwinds Clash With Ongoing Growth Strategy

Recent commentary around QXO (QXO) has focused on the company’s roofing division, with some headwinds such as lower storm activity and sluggish new construction weighing on expectations, especially as the industry heads into winter.

See our latest analysis for QXO.

QXO’s share price has stirred up some volatility lately, with a recent slide of more than 10% over the past month as weather-driven softness in roofing and talk of winter inventory cuts have weighed on sentiment. Even so, momentum hasn’t disappeared completely. The stock is still up 20.9% year-to-date, and its one-year total shareholder return clocks in at a healthy 16.5%, which shows that long-term holders have seen meaningful gains despite recent turbulence.

If QXO’s ride has you wondering what other opportunities are out there, this could be a great moment to broaden your search and discover fast growing stocks with high insider ownership

With analysts reaffirming their Buy ratings despite industry headwinds, is QXO trading at a discount to its true value? Or is the market already factoring in the company’s future growth potential, leaving little room for upside?

Price-to-Sales of 6.4x: Is it justified?

QXO is trading at a price-to-sales ratio of 6.4x, a much higher level than its peers and the broader US Trade Distributors industry. With a last close of $18.58, the current price suggests investors are assigning a significant premium to QXO’s top line compared to what is typical for its sector.

The price-to-sales (P/S) ratio measures how much investors are willing to pay for each dollar of the company’s sales. This multiple is widely used for fast-growing but unprofitable companies, as it sidesteps net income volatility and focuses purely on revenue generation. For a business like QXO, rapid revenue growth may be fueling the elevated P/S figure. However, it also raises the question of whether the current stock price is overextending on expectations.

QXO’s 6.4x price-to-sales is over twice the peer average (2.8x) and more than six times the US Trade Distributors industry average (1x). Even versus the estimated fair P/S ratio of 5.6x, QXO appears expensive. This suggests that the market may be extrapolating exceptional growth further into the future than justified by its fundamentals.

Explore the SWS fair ratio for QXO

Result: Price-to-Sales of 6.4x (OVERVALUED)

However, continued revenue growth could stall if industry conditions worsen or if profit margins fail to recover. This could put the lofty valuation at risk.

Find out about the key risks to this QXO narrative.

Another View: SWS DCF Model Shows Undervaluation

While QXO's price-to-sales ratio paints a picture of an expensive stock, the SWS DCF model suggests a completely different story. Based on this discounted cash flow approach, QXO's fair value stands at $50.49, far above its current price of $18.58. This points toward an undervalued opportunity. Could the market be overlooking QXO’s long-term cash generation?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out QXO for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own QXO Narrative

If you have a different perspective or want to dive deeper into the numbers on your own terms, you can craft a personalized view in just a few minutes. Do it your way

A great starting point for your QXO research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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