Builders FirstSource, Inc. (NYSE: BLDR)

Builders FirstSource, Inc. (NYSE: BLDR) together with its subsidiaries, manufactures and supplies building materials, manufactured components, and construction services to professional homebuilders, sub-contractors, remodelers, and consumers in the United States. 

As of June 24, Builders FirstSource, Inc. (NASDAQ:BLDR) has climbed 17.66% over the past twelve months and is currently trading at $52.76 with a PE ratio of 4.74. These are only some of the features that make it a compelling stock from the industrials sector for value investors.

Here is why you should consider investing in Builders FirstSource, Inc. (NASDAQ:BLDR) according to Black Bear Value Partners, who mentioned the company in their Q1 2022 investor letter:

“Builders FirstSource is a supplier and manufacturer of building materials for professional homebuilders, subcontractors, remodelers, and consumers. Their products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows and custom millwork.

The fundamental discussion about homebuilders applies to BLDR. As more homes are built across the country, there will be an increased need for scaled sourcing of products to homebuilders. There is a large amount of fragmentation in the supply chain which provides BLDR a long runway for acquisitions and realistic synergies.

The management team has been using their prodigious free cash flow to both acquire new businesses and buy in their stock. While I historically always liked their business, their historic high-debt levels gave me pause. They have right sized their balance sheet and are taking a very thoughtful view on capital allocation on behalf of shareholders.

BLDR should be able to generate $7-$10 a share in cash in the medium term with significant upside if they can scale through acquisition and/or further penetrate existing markets. We own it at a 11-15% free-cash flow yield so little growth is needed for us to compound value at high rates.”