Strong Share, A Recovering Market, And Margin Leverage Supporting Masonite's Outlook

For all of the too clever by half ticker symbols, Masonite's (NYSE:DOOR) is pretty straightforward - it makes doors, it makes a lot of doors, and it more or less makes only doors. A virtual duopolist in the North American interior doors market, Masonite is taking advantage of improving housing markets (both new construction and remodeling) and looking to boost margins on a richer product mix and improving utilization.

Masonite shares have outperformed the S&P 500 over the past year and are quite popular with the sell-side community. Nevertheless, I think there could still be upside here if the company can leverage mid-single-digit revenue growth into double-digit free cash flow growth.

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Strong Share, A Recovering Market, And Margin Leverage Supporting Masonite's Outlook

Seeking Alpha: Norcraft Executing Its Model To Good Effect

Even though the new housing market has yet to rebound as strongly as many have hoped, the remodeling market has been stronger. That, coupled with strong discipline to drive an improved mix and walk away from low-margin business, has helped Norcraft (NYSE:NCFT) post solid revenue growth and margin improvement in recent quarters.

Better sales and margins have also been good for the stock, which has risen about 38% since my last piece on this cabinet maker in May of 2014. To be sure, it hasn't been that hard to make money in stocks tied to remodel/renovation, as direct competitors like Fortune Brands Home & Security (NYSE:FBHS), Masco (NYSE:MAS), and American Woodmark (NASDAQ:AMWD) have risen 14%, 26%, and 101% respectively, and other plays on the space like Mohawk (NYSE:MHK), Headwaters (NYSE:HW) (a building materials company), and Armstrong World Industries (NYSE:AWI) have rise 33%, 41%, and 5% respectively over that same period of time.

There's still a lot to like about Norcraft, and next week's (March 30th) earnings report could be another opportunity for management to deliver further improvements in mix and margins. These shares don't look so cheap these days, though another beat-and-raise quarter will at least kick the argument about valuation down the road a little further.

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Norcraft Executing Its Model To Good Effect

Seeking Alpha: More R&R Won't Mean Much Rest For Norcraft

As residential property values continue to recover, it should only mean good things for demand for Norcraft's (NCFT) kitchen and bathroom cabinets. One of the top five cabinetmakers in the country, and one of the top three in the dealer channel, Norcraft's sales are leveraged in part to improving remodel and renovation demand (which is, in turn, leveraged to improving home values). With experienced management and a tailwind to margins from higher capacity utilization, Norcraft shares still appear to be priced to offer some upside to the ongoing housing recovery.

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More R&R Won't Mean Much Rest For Norcraft

Investopedia: Armstrong's Ready For The Rebound, But How Much Longer Will It Take?

If you believe that corporate managers should only be judged by the variables they can control, Armstrong Worldwide (NYSE:AWI) has done quite well. While the declines in the residential and commercial building and remodeling markets have hamstrung sales growth, the company's expense structure has been slimmed down and the company maintains strong share in many of its markets. The question now, however, is whether or not the market has already factored in a significant recovery ahead of real improvements in building and remodeling activity.

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Investopedia: Stanley Black & Decker And Spectrum Brands Both Get What They Want

Stanley Black & Decker (NYSE:SWK) wants to be involved with businesses with global reach, as well as find a happy medium between consumer, construction and industrial market exposures. Spectrum Brands (NYSE:SPB) wants quality brands that can offset competition from Procter & Gamble (NYSE:PG) and Energizer (NYSE:ENR), while also producing good cash flow. These two wants came together on Tuesday morning with the announcement that Spectrum Brands is buying the Hardware and Home Improvement (HHI) business of Stanley Black & Decker for $1.4 billion in cash.

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http://www.investopedia.com/stock-analysis/2012/Stanley-Black--Decker-And-Spectrum-Brands-Both-Get-What-They-Want-SWK-SPB-PG-MAS1009.aspx

Investopedia: American Woodmark Making The Best Of The Worst

When you sell products into the housing market and the housing market is going through its worst stretch in living memory, the rest of the story goes pretty much the way you would expect. From peak to trough, cabinet and vanity maker American Woodmark (Nasdaq:AMWD) saw sales drop more than 50% and free cash flow plunge into the red.

That said, American Woodmark hasn't really done any worse than rivals like Masco (NYSE:MAS) or Fortune Brands Home & Security (Nasdaq:FBHS) in terms of market share, and has only had one year of negative free cash flow. With a clean balance sheet and major placement in both Home Depot (NYSE:HD) and Lowe's (NYSE:LOW), this may be a "when, not if" recovery story that could pay off for patient investors.

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http://stocks.investopedia.com/stock-analysis/2012/American-Woodmark-Making-The-Best-Of-The-Worst-AMWD-MAS-FBHS-HD0607.aspx