JELD-WEN Struggling Now And Demand Could Erode Further Next Year

The manufactured building materials sector has admittedly seen some poor performers over the last two years despite strong residential and non-residential activity, but JELD-WEN (NYSE:JELD) (“Jeld-Wen”) nevertheless stands out with particularly poor performances on growth, margins, returns (ROIC, et al), and share price performance. Double-digit price increases haven’t been enough to offset steep cost inflation, and now the company is going into a period where underlying demand could well be noticeably weaker. On top of all that, whenever the company names its next permanent CEO, that will be the fourth such appointment in nine years – not a mark of stability.

When shares of a company like Jeld-Wen look cheap, it’s fair to ask yourself whether you’re underestimating just how tough things really or whether the market has overreacted and left the stock for dead. In many cases the answer can be “both”, and that could be the case here. I don’t feel like forward revenue growth of 3% to 4% and free cash flow margins in the 3% to 4% range are especially aggressive assumptions, but if pricing normalizes, they could well prove too aggressive and whatever undervaluation I see here could vanish quickly.

 

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 JELD-WEN Struggling Now And Demand Could Erode Further Next Year