UFPI - UFP Industries: Overvalued Even If It Can Continue To Grow With Acquisitions

2024-05-30 03:58:43 ET

Summary

• UFP Industries has achieved growth through organic growth and acquisitions, with a significant boost from price spikes in 2021/22. Acquisitions contributed more to growth than organic growth.
• The company operates in a low-growth sector and would need continuous acquisitions to achieve double-digit growth. The company has the financial sources to pursue this acquisition strategy.
• While it had delivered improving returns, a valuation based on continuous acquisitions does not provide a 30% margin of safety.

Investment Thesis

UFP Industries' ( UFPI ) growth over the past 9 years was due to organic growth and acquisitions. At the same time, its performance was boosted by an extraordinary price spike in 2021/22. The company is fundamentally sound with topline and bottom-line growths even if you ignore the 2021/22 price spike....

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