IBP - Installed Building Products: Impressive Compounder With Long-Term Potential
2024-02-06 21:04:55 ET
Summary
- IBP has achieved impressive growth (CAGR: +21%), driven by a combination of quality M&A and organic growth.
- Management has developed a strong competitive position, with a broad suite of services and geographical presence in the US.
- Industry tailwinds, such as the shortage of homes and the green initiative, should drive growth in the coming years, allowing IBP to continue to outperform.
- The company is outperforming its peers and has greater long-term potential, given its ability to deliver margin improvement consistently.
- IBP’s considerable share price appreciation limits its short-term potential, particularly as its FCF yield has declined below its average.
Investment thesis
Our current investment thesis is:
- Investors will be able to acquire IBP at a better price in the coming months or will have the opportunity to slowly build a position without a significant run in its share price.
- The business is clearly fantastic and has further room to grow we feel. The company’s share price has grown with a linearity of time of ~0.8, while its FCF has grown at a linearity of 0.9 to revenue. This business will keep winning, be it with M&A, increased buybacks, or both.