Over the past six months, Trex’s stock price fell to $62.20. Shareholders have lost 14.2% of their capital, which is disappointing considering the S&P 500 has climbed by 3.7%. This might have investors contemplating their next move.
Is there a buying opportunity in Trex, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Trex Not Exciting?
Even with the cheaper entry price, we're cautious about Trex. Here are three reasons why TREX doesn't excite us and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Trex’s recent performance shows its demand has slowed as its annualized revenue growth of 5.4% over the last two years was below its five-year trend. 
2. EPS Growth Has Stalled
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Trex’s flat EPS over the last five years was below its 7.8% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Trex’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
Trex isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 28× forward P/E (or $62.20 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.
Stocks We Like More Than Trex
Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
