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.

 

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Masonite Looking Undervalued As Improvement Initiatives Take Hold