SSD - Simpson Manufacturing: Solid Execution And Housing Recovery Position It For Growth
2024-07-23 13:05:03 ET
Summary
- Company faces near-term challenges but revenue growth is expected to improve after the interest rate cycle reverses.
- Strong track record of outperforming end markets through execution, innovation, and capacity expansions.
- Margins may face pressure in the near term, but are expected to improve with cost synergies and growth investments. The stock valuation looks attractive.
Investment Thesis
I last covered Simpson Manufacturing Co., Inc. ( SSD ) in October 2023 and while the company has faced headwinds from challenging market conditions since then, especially in the housing sectors in the U.S. and Europe, the stock is up a reasonable ~20%. I believe we are close to the bottom in terms of business fundamentals, and the company’s revenue growth should improve once the interest rate cycle turns in the next few quarters. Moreover, the company has a strong track record of outperforming its end markets, driven by its good execution in terms of building long-standing relationships, focusing on product innovation, enhancing customer service, and capacity expansions. I expect this solid execution to continue and drive end-market outperformance in the coming quarters. Additionally, the supply-demand conditions in the housing market remain tight, which bodes well for long-term revenue growth. Besides organic growth, the company has a healthy balance sheet and is well-placed to do M&A....
Simpson Manufacturing: Solid Execution And Housing Recovery Position It For Growth