When I last wrote about Louisiana-Pacific (NYSE:LPX) (or “LP”) back in October of 2016, I thought the shares
still had upside on the basis of ongoing price/margin leverage in OSB,
continued growth in housing, and the growth of the company’s siding
business. The shares are up about 50% since then, outperforming most of
its peers like Norbord (NYSE:OSB), James Hardie (NYSE:JHX), and Weyerhauser (NYSE:WY) over that time (Ply Gem (NYSE:PGEM) has nearly matched LP, while Boise Cascade (NYSE:BCC)
has outperformed), as OSB pricing has exceeded expectations on
uncommonly responsible competitor behavior and as the company has
executed well on its operating improvements and siding growth plans.
It’s
harder to see as much upside now. While OSB pricing has held up, and
likely will remain above $300 despite oncoming capacity growth, and
siding continues to have strong growth potential, I believe a lot of
that is in the share price. I don’t think LP shares are overvalued on
the basis of cycle-average EBITDA, but I do believe that 2018 could be
the near-term peak and the returns could look more “market-like” from
this point.
Follow this link to the full article:
Louisiana-Pacific Making The Best Of The Cycle
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