BLDR Builders FirstSource
Cyclical housing recovery bet with leverage and margins doing most of the valuation work.
The story
Builders FirstSource is the largest U.S. building-products distributor and value-added manufacturer, tied tightly to new residential construction and repair/remodel demand. Its scale, local density, and installed services give it some cost and service advantages, but this is still a cyclical, working-capital-heavy business with margins normalizing sharply from pandemic-era peaks. The company is in a mature cyclical phase, with value depending on a housing recovery and whether normalized margins settle closer to mid/high single digits than recent trough levels.
I am keeping the prior drivers because the new facts show continued cyclicality, not a structural change: TTM margin has weakened to 4.2%, but sales-to-capital remains near the prior 1.7 and recent news is neutral rather than thesis-changing. The 8% target margin assumes recovery from the trough but not a return to pandemic peak economics, while the elevated beta and modest failure probability reflect housing-cycle and leverage risk.
Value drivers
| Revenue growth (Y1) | 3.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 8y |
| Target operating margin | 8.0% |
| Years to target margin | 6 |
| Sales-to-capital | 1.70 |
| Beta | 1.35 |
| Failure probability | 4.0% |
| Cost of capital (WACC) | 9.8% |
| Terminal WACC | 8.8% |
Valuation bridge
| PV of explicit FCFF | 3.60B |
| PV of terminal value | 6.89B |
| Equity value | 5.98B |
| ÷ shares → per share | $55.61 |
News
neutral +0.10 · 8 articles
- Does Builders FirstSource’s (BLDR) Russell 2500 Move Offset Concerns About Its Core Earnings Power?
- Builders FirstSource (BLDR) Joins Russell 2500 Indexes And Puts Its Stock In Focus
- Is Builders FirstSource (BLDR) Fully Priced After The Housing Bill Boost?
- Stock Market Today, June 30: QXO Falls After TopBuild Merger-Election Results Show Most Shareholders Opt for Cash
- 3 Unpopular Stocks That Concern Us
- Builders FirstSource (BLDR) Rises Higher Than Market: Key Facts
- Builders FirstSource and Gibraltar Shares Skyrocket, What You Need To Know
- Update: Nasdaq, S&P 500 Extend Slide on AI-Chip Caution; Oil Sinks
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 15.26B | 3.0% | 4.8% | 623.67M | 261.53M | 362.14M | 329.68M |
| 2 | 15.71B | 2.9% | 5.4% | 727.07M | 262.97M | 464.11M | 384.64M |
| 3 | 16.16B | 2.9% | 6.1% | 835.41M | 264.06M | 571.35M | 431.08M |
| 4 | 16.61B | 2.8% | 6.7% | 948.69M | 264.82M | 683.87M | 469.74M |
| 5 | 17.06B | 2.7% | 7.4% | 1.07B | 265.22M | 801.67M | 501.30M |
| 6 | 17.51B | 2.6% | 8.0% | 1.19B | 265.25M | 924.73M | 526.43M |
| 7 | 17.96B | 2.6% | 8.0% | 1.22B | 264.90M | 955.68M | 495.29M |
| 8 | 18.41B | 2.5% | 8.0% | 1.25B | 264.16M | 986.93M | 465.64M |
Key risks
- Higher-for-longer mortgage rates suppress housing starts and big-ticket remodel demand
- Normalized margins settle below 8% as commodity deflation and competition pressure pricing
- Leverage limits flexibility if the housing downturn persists
Catalysts
- Mortgage-rate relief revives housing starts and builder demand
- Cost actions and value-added mix stabilize margins above trough levels