Sometimes the opportunity lies not on the ceiling but the floor. Shares of Trex (NYSE:TREX) soared 16.45% higher last week, fueled by a financial report showing its heartiest top-line growth in three years. 

The leader of wood-alternative composite decking saw its revenue for the third quarter soar 32% to $140.2 million. You have to go back to the third quarter of 2014 to find the last time Trex's top line was growing this quickly. Trex's guidance was only calling for $126 million in revenue. Adjusted earnings rose 34% to $0.68 a share. Trex doesn't offer up a bottom-line forecast, but analysts were only holding out for a profit of $0.55 a share.

 

An outdoor Trex patio with a bean-toss game.

Image source: Trex.

Wood intentions

Trex's robust top-line growth wasn't all organic. It closed on its acquisition of SC Company -- a purchase that introduces commercial flooring products to its lineup -- and that was enough to pad the decking giant's results by $9 million in August and September. However, Trex made the acquisition announcement at the end of July when it offered up its guidance. It was already baking in $9 million from its new commercial products line into its guidance of $126 million for the period. 

Even if you back out the new commercial lines, Trex still managed to grow its flagship residential products line by 23%, still its healthiest revenue growth in three years. The bottom-line beat is also a pretty big deal. Trex has consistently landed ahead of Wall Street pros over the past year, but the degree of the outperformance is accelerating. 

 Quarter EPS  EPS est. Surprise
Q4 2016 $0.43 $0.41 5%
Q1 2017 $0.95 $0.89 7%
Q2 2017 $0.97 $0.88 10%
Q3 2017 $0.68 $0.55 24%

Data source: Yahoo! Finance. EPS = earnings per share.

Trex's guidance for the fourth quarter isn't as inspiring as its blowout third quarter, but it's also worth remembering that there is seasonality here. The final quarter has always been Trex's weakest showing as folks aren't thinking about extending their outdoor living areas when the weather turns cold. Trex is targeting $118 million in revenue for the fourth quarter, 24% ahead of last year as a $14 million contribution from the new commercial products pads a projected 9% gain in its legacy residential products sales. 

Once again Trex isn't offering up guidance on the bottom line, but margins continue to expand as lower input costs and increased capacity utilization combine with process improvement programs to drive earnings growth. There's no reason to believe that analysts are aiming too low, again. 

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Trex. The Motley Fool has a disclosure policy.