Masonite Looking Undervalued As Improvement Initiatives Take Hold

 

If Masonite (DOOR) can’t succeed today, when can it?

Despite a virtual duopoly in interior doors and a strong position in exterior doors, Masonite has struggled in recent years on a host of operating issues, leading to a five-year performance that trails both the S&P 500 and the building materials sector.

Since 2019, though, the company has had new management, and between increased pricing power and more activity on restructuring and growth initiatives, the results have been improving. A stronger residential market has likewise given the company a healthy tailwind for at least the next year.

I do worry that management’s targets are too bold, but the Street doesn’t seem to believe them anyway, so I’m not sure how much risk of underperformance there really is. Relative to my model, these shares do seem to hold value if the company can deliver on mid-single-digit revenue and FCF growth, though I am expecting a level of margin performance the company has not managed before.

 

Follow the link to the full article: 

Masonite Looking Undervalued As Improvement Initiatives Take Hold

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.

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