Trex's (TREX 2.25%) new manufacturing facility it's building could greatly ease distribution costs. Should investors swoop in now? In this clip from "3 Minute Stocks Updates" on Motley Fool Live, recorded on July 19, Motley Fool contributor Toby Bordelon discusses why Trex might be a stock investors should have on their radar.
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Toby Bordelon: They're also building a new manufacturing facility near Little Rock, Arkansas. Why Arkansas? Well, check this out. The red triangles are the location of their distribution partner locations. The five-point stars where are their two manufacturing facilities are now. That four-pointed star in Arkansas, their new location, and you can see why they would do that. This gets them a manufacturing facility in the middle of the country here. They've already got the West Coast and East Coast covered, and distribution costs are an issue, we know that this is the big issue for a lot of companies. Transportation costs and fuel costs are rising. It's also the cost to get the raw materials to the factory. This new factory, they say, is located closer to some of their suppliers for some of their ingredients that go into that. If you can cut down on your transportation costs, you can cut down your distance from your suppliers and to your distributors, you should do that. If you're going to build a factory anyway, if you can justify it by the demand you're seeing, which they can, locate it geographically, strategically, which is what they're doing. I like where they're going here. Construction was supposed to start this year. We will probably get an update on that in the new earnings report, I hope. With production starting in 2024, so it's going to be a while. They are financed primarily out of operating cash flow though, which is good. They are not going to take on debt because they're funding it out of operating cash flow: $400 million over five years. But it's great to see a company that can take just the cash they generate and grow like this and fund a new manufacturing facility just from the cash that they're generating instead of having to go out and raise capital to do it, so I love that, I love that they are doing that. But that's Trex, growth is looking pretty good so far.