What a difference a few months make. It wasn't all that long ago that people were debating if the new-housing market would slow down. Now, it seems, the argument isn't about "if" but about "how bad." And while I'm willing to believe that residential construction is slowing, and that it may slow a lot in the markets that were hottest, I'm not willing to indiscriminately write off all of the companies in this sector.

In other words, I'm keeping an eye on Building Materials Holding (NASDAQ:BMHC), with an eye toward possibly buying shares if things get too pessimistic.

For now at least, the story here is still about growth. Sales were up 54% as reported and 14% on an organic basis. Margins were more of a worry -- gross margins dropped more than a point, and operating margins fell by nearly a point. That, in turn, led to 35% operating income growth as reported and an actual decline in income from operations after adjusting for acquisitions.

Set this against a backdrop of declining housing starts and a poor recent performance from the stocks of homebuilders such as Hovnanian (NYSE:HOV) and Toll Brothers (NYSE:TOL), and folks are starting to get a little worried. And, oh, by the way, Home Depot (NYSE:HD) is trying to increase its presence in some of the markets in which Building Materials operates.

So even though that's a pretty pessimistic collection of circumstances, I think this one could still be a value candidate if investors get carried away. Building Materials is a consolidator in a very fragmented industry and is seemingly doing well for itself by focusing on installation services -- an area with fewer sizable competitors. Masco (NYSE:MAS) really doesn't target the same business.

And let's also not forget that while housing may slow and even decline, the overall long-term outlook is still pretty positive. Accordingly, I'm keeping this one on my watch list on the chance that it might decline to a point where even my pessimistic assumptions make it look undervalued. That approach has already worked well for me in the banking and steel sectors, and it's probably only a matter of time before declines in stocks attached to residential construction get overly cheap as well.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).