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4-Star Stocks Poised to Pop: Headwaters

By Brian D. Pacampara, CFA - Updated Apr 5, 2017 at 7:52PM

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Market-trouncing returns could be written in this 4-star.

Based on the aggregated intelligence of 125,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, building materials supplier Headwaters (NYSE:HW) has earned a respected four-star ranking. While five-star stocks have been the best performers, our data has shown that four-star stocks still outshine the market by a significant margin and shouldn't be taken lightly; conversely, low-rated stocks have woefully lagged the market average.

With that in mind, let's take a closer look at Headwaters' business, and see what CAPS investors are saying about the stock right now.

Headwaters facts

Headquarters (founded) South Jordan, Utah (1987)

Market Cap

$285.28 million

Industry

Construction Materials

TTM Revenue

$886.4 million

Management

Chairman/CEO Kirk Benson (since 1999)

CFO Steven Stewart (since 2007)

Return on Capital (average, last three years)

6.7%

Competitors

Alcoa (NYSE:AA),

Cemex (NYSE:CX)

CAPS members bullish on HW also bullish on:

Chesapeake Energy (NYSE:CHK),

Suntech Power

CAPS members bearish on HW also bearish on:

Toll Brothers (NYSE:TOL),

Centex (NYSE:CTX)

Sources: Capital IQ (a division of Standard & Poor's), and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, 736 of the 793 members who have rated Headwaters -- or 93% -- believe the stock will outperform the S&P 500 going forward. These bulls include KipLargo and OtherOracleOfOMA.

Last week, KipLargo drew a political parallel to describe Headwaters: "Will be annointed by the Obama administration. It honestly could be what [Halliburton (NYSE:HAL)] was to the Bush administration."

In an earlier pitch from last month, OtherOracleOfOMA shares that bullishness, writing:

Exceptional company that has had a run of freakishly bad luck recently. Their building materials segment in particular should make a big comeback, as their insulator concrete will become increasingly used to meet higher building energy efficiency standards.

Also, the bottom line is significantly understated due to goodwill write-downs owing to the housing market; look at the adjusted income to getter a better picture of the firm's real economic value.

What do you think about Headwaters, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 125,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Chesapeake Energy is a Motley Fool Inside Value pick. Cemex is a choice of both Global Gains and Stock Advisor. Suntech Power is a recommendation of Rule Breakers. The Fool owns shares of Cemex. The Fool's disclosure policy always gets a perfect score.

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Stocks Mentioned

Headwaters Incorporated Stock Quote
Headwaters Incorporated
HW
Alcoa Inc. Stock Quote
Alcoa Inc.
AA
Toll Brothers, Inc. Stock Quote
Toll Brothers, Inc.
TOL
$48.91 (-1.17%) $0.58
Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q
Halliburton Company Stock Quote
Halliburton Company
HAL
$28.20 (-0.04%) $0.01
CEMEX, S.A.B. de C.V. Stock Quote
CEMEX, S.A.B. de C.V.
CX
$4.47 (-1.76%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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