First Read: Trex Company Inc "TREX re-aligns distribution partners; prelim..."

Research evidence excerpt

First Read: Trex Company Inc "TREX re-aligns distribution partners; prelim..."

Forecast returns

Forecast price appreciation 32.9%

Forecast dividend yield 0.0%

Forecast stock return 32.9%

Market return assumption 9.2%

Forecast excess return 23.7%

Company Description

Trex Co Inc,. headquartered in Winchester, VA, is a leading manufacturer of composite

decking and railing products. The company goes to market with several brands, including

Enhance, Select, Transcend, and Signature.

Valuation Method and Risk Statement

Price Target Methodology: Our $61 PT on TREX shares is based on a roughly 17x adj. 2026e

EV/2027e EBITDA multiple.

Risks: 1) new COVID variants may delay consumer willingness to allow professional

contractors into/around their homes, 2) an inability to maintain composite deck prices that

are competitive with wood, 3) potential for consumers to lose interest in outdoor living

related products as COVID eventually fades, 4) slowing economic activity could lower

consumer confidence and cause delays in big-ticket purchases such as composite decks and

rails, 5) pricing power may be insufficient to offset rising raw materials costs, 6) higher diesel

costs could impact logistic operation, 7) labor shortages could delay production and delivery

schedules, 8) rising interest rates could negatively impact new construction activity, 9) home

values could decline, negatively impacting home equity loan availability and confidence in

reinvesting in the home, 10) surge in COVID related home improvement activity may have

pulled forward demand, 11) existing home inventory could remain tight, negatively impacting

existing home sales which are often accompanied by R&R projects, 12) share losses to the two