While the broader market has struggled with the S&P 500 down 7.3% since October 2024, AZEK has surged ahead as its stock price has climbed by 7% to $48.75 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Following the strength, is AZEK a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Is AZEK a Good Business?
With a significant portion of its products made from recycled materials, AZEK (NYSE: AZEK) designs and manufactures goods for outdoor living spaces.
1. Core Business Firing on All Cylinders
We can better understand Building Materials companies by analyzing their organic 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 10.7% year-on-year growth. This performance was impressive and shows it can expand quickly without relying on expensive (and risky) acquisitions. 
2. Operating Margin Rising, Profits Up
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Looking at the trend in its profitability, AZEK’s operating margin rose by 16.2 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 15.3%.
3. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
AZEK’s EPS grew at a spectacular 16.8% compounded annual growth rate over the last five years, higher than its 12.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why AZEK ranks highly on our list, and with its shares topping the market in recent months, the stock trades at 32.6× forward price-to-earnings (or $48.75 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than AZEK
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