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Why Trex Company, Inc.'s Shares Popped Today

By Travis Hoium – Feb 24, 2014 at 3:58PM

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Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of construction distributor Trex Company, (TREX 1.89%) jumped as much as 27% today after the company reported earnings.

So what: Fourth-quarter revenue was up 38.1% from a year ago to $63.8 million, well ahead of the $50.5 million estimate from Wall Street. Earnings per share of $0.23 were also well ahead of the $0.06 estimate.

Now what: First-quarter guidance was lighter than expected, but management said that stocking in the fourth quarter pushed sales out of the first quarter and back into 2013. For the six-month-period ending in the first quarter of 2014, sales are expected to be up 16%. The growth trends and industry strength are driving operations in the right direction, but shares trading at 30 times earnings are just too expensive for me to be a buyer today.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Trex. The Motley Fool owns shares of Trex. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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