AZEK’s 16.2% return over the past six months has outpaced the S&P 500 by 8.3%, and its stock price has climbed to $47.97 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy AZEK? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does AZEK Spark Debate?
With a significant portion of its products made from recycled materials, AZEK (NYSE:AZEK) designs and manufactures goods for outdoor living spaces.
Two Things to Like:
1. Skyrocketing Revenue Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, AZEK’s sales grew at an excellent 12.7% compounded annual growth rate over the last five years. Its growth surpassed the average industrials company and shows its offerings resonate with customers. 
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, AZEK’s margin expanded by 9.9 percentage points over the last five years. This is encouraging because it gives the company more optionality. AZEK’s free cash flow margin for the trailing 12 months was 10.2%.
One Reason to be Careful:
Slow Organic Growth Suggests Waning Demand In Core Business
Investors interested in Building Materials companies should track organic revenue in addition to reported revenue. This metric gives visibility into AZEK’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, AZEK’s organic revenue averaged 5.2% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
Final Judgment
AZEK has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 34.3× forward price-to-earnings (or $47.97 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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