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The Company is a manufacturer of wood-alternative decking, railing and fencing products, which are marketed under the brand name Trex.
Following JakilatheHun. Trex Company is a manufacturer of wood alternative decking, railing and fencing products that are made from recycled materials. Until 2005, the company experienced rapid growth and high profits. But in 2005, the growth stopped and return on equity shrank from the high teens to low single digits. The company has been unable to recover in later years. Trex Company's annual reports give all sorts of excuses for poor performance but never mentions the fact that competition has increased. Ten years ago, Trex had an unusual (possibly even unique) product. Now there are countless imitators and margins have shrunk to very low levels. This stock is up dramatically on signs of a housing bottom. As a result, the stock of this troubled company is now trading at 2 times book value and 45 times expected 2010 earnings. This is much too high for a company with low margins and poor longterm sales prospects.
I'm a bit perplexed, to be honest. I haven't initiated a pick on this stock. However, it is in my "limit order" pile right now and will automatically red thumb if it hits $23. Are people somehow able to see my limit orders? Do they go through on the "Favorites" list? In any case, I think it's overvalued at the current levels, but I'm not quite as bearish as many others on this one and wanted a sizable margin of safety for TWP.
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