Assessing TopBuild’s (BLD) Valuation After Raised Guidance and Steady Growth in Latest Earnings

TopBuild (NYSE:BLD) just raised its full-year revenue and earnings guidance after reporting steady third quarter results. The company highlighted the positive impact of recent acquisitions and integration efforts across its business segments.

See our latest analysis for TopBuild.

TopBuild's raised outlook arrives as the stock builds on impressive momentum. After a robust year-to-date share price return of 35%, the one-year total shareholder return stands at 20.7%. While recent weeks saw some pullback following earnings and buyback updates, the long-term performance remains a standout, with a three-year total shareholder return of 183% signaling sustained growth expectations.

If TopBuild's trajectory has you curious about where else strong momentum and strategic moves are taking shape, now is the perfect time to discover fast growing stocks with high insider ownership

With TopBuild adjusting its guidance higher while also facing some profit pressures, is the company now trading at an attractive entry point for investors, or is the market already reflecting the potential gains ahead?

Most Popular Narrative: 13.6% Undervalued

With TopBuild trading at $418.99 and the most followed narrative placing fair value at $485.08, the outlook suggests solid upside potential according to non-market consensus. These expectations set up an intriguing backdrop for understanding what is fueling this optimism.

The company's disciplined M&A strategy in a highly fragmented industry, along with investments in operational efficiencies and supply chain optimization, is expected to unlock synergies, expand scale, and drive incremental EBITDA margin improvements. This is anticipated to contribute to stronger future earnings growth.

Read the complete narrative.

What exactly are analysts projecting for earnings, revenue, and margins that power this bullish narrative? There is a bold bet on growth, efficiency, and buybacks built into the numbers, but you will need to see the full narrative to uncover which assumptions are actually driving the “undervalued” call.

Result: Fair Value of $485.08 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent weakness in U.S. residential construction and challenges integrating recent acquisitions could quickly dampen the upside case that analysts have built.

Find out about the key risks to this TopBuild narrative.

Another View: Is the Market Paying Too Much?

While the most popular narrative points to TopBuild being undervalued, a look at its price-to-earnings ratio tells a different story. TopBuild trades at 20.6 times earnings, which is much higher than both the industry average of 10.5x and its fair ratio of 15.9x. This suggests investors may be paying a premium, taking on greater valuation risk if growth falls short. Could the strong outlook already be priced in?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own TopBuild Narrative

If you have a different perspective or want to see how the numbers shape up for you, it only takes a few minutes to build your own narrative. Do it your way

A great starting point for your TopBuild research is our analysis highlighting 2 key rewards and 2 important warning signs 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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