NCI Building Systems Offers More Than A Cycle Play

When I last wrote about NCI Building Systems (NYSE:NCS), I thought the shares looked as though they had some value on the prospects for a continued recovery in non-residential construction, as well as some self-help margin improvements. While the shares are up about a third since then, investors frankly would have done better investing in the S&P 500 or more residential-sensitive names like Louisiana-Pacific (NYSE:LPX) or Trex (NYSE:TREX).

I do have some concerns about what looks like modest share loss over the past couple of years at NCI, but much of that is offset by the potential of the company's expanded insulated panel business, as well as the ongoing progress in margin improvement. Although I expect a more "slow and steady" trend in non-residential construction, and I don't think past data regarding "average" peaks and troughs is all that useful, mid-single-digit growth in revenue and mid-single-digit FCF margins would support a fair value in the high teens today.

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NCI Building Systems Offers More Than A Cycle Play