What Is Trex Company, Inc.'s (NYSE:TREX) Share Price Doing?

Today we're going to take a look at the well-established Trex Company, Inc. (NYSE:TREX). The company's stock led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Trex Company’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Trex Company

Is Trex Company still cheap?

Trex Company is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 69.37x is currently well-above the industry average of 20.87x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Trex Company’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Trex Company generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Trex Company's earnings over the next few years are expected to increase by 69%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? TREX’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe TREX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TREX for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for TREX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Trex Company, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for Trex Company (1 shouldn't be ignored) you should be familiar with.

If you are no longer interested in Trex Company, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.