Trex Company, Inc. (NYSE:TREX)

The Trex company manufactures and sells composite decking materials made of recycled plastics and reclaimed wood particles. Trex started when Roger Wittenberg in the late 1980’s invented a process for producing a composite plastic/wood product, Roger later sold his company to Mobil Chemical, and finally the brand was then spun off by employees of Mobil to create Trex as a standalone brand. Trex is now the industry leader in composite decking products, and also markets lighting, railings, and other associated products.

postitives

- [x] -high focus on environmental impact
- [x] -cashflow positive and actively reinvesting in company growth, just completed a new plant an announced another still coming online in 2024
- [x] -Trex seems to have a strong enough brand that its often put in its own group when it comes to decking options
- [x] -current CEO has served over 15 years at the company (only ceo since last spring)
- [x] -product is customer and builder facing
- [x] -Ceo bryan fairbanks started with the company working in their supply chain division, this could give the company some good insight on how to navigate current conditions
- [x] -Ceo seems to like being hands on with the manufacturing processes
- [x] -First mover and leader in composite space
- [x] -strong value proposition
- [x] -Large reatilers (lowes and HD) only have so much floorspace and new brands have a hard time getting in
- [x] -Growth in recent years may be very understated as they have minimized their international expansion with ramping up to service domestic market taking centre stage
- [x] -lots more share buybacks coming (~$1B/8.2M shares worth)
- [x] -strong secular tailwinds with people moving out of cities to suburbs offering more building opportunities
- [x] -managed to overcome 7.5% of inflationary pressures to improve gross margin by 1.5% in most recent quarter
- [x] -cladding market just coming into its own
- [x] -strong past price appreciation

negatives

- [x] -7 different ceo’s - not terribly unusual for a company of this age though
- [x] -low consumer scores on BBB and consumer affairs, mostly related to warping, discolouration, stains, and difficulty with customer care
- [x] -all talk on calls is focused on margin building, very little on product, customers
- [x] -Bryan says M&A is focused on businesses with margins in line or stronger than Trex’s (may be blinding them from looking at newer, better products)
- [x] -being reliant on recycled material could be a growth inhibitor especially as the world moves more away from plastics
- [ ] no firm plan on how to reuse/recycle trex’s boards once they come to end of life, tex does not accept formerly recycled plastics as there is uncertainty of their composition, this may not be an issue with their own products though, time will tell