TOPBUILD CORP (NYSE:BLD) – A Quality Stock with Strong Fundamentals

TOPBUILD CORP (NYSE:BLD) stands out as a potential candidate for quality investors, meeting key criteria for profitability, financial health, and efficient capital allocation. The company, which specializes in insulation installation and distribution for the U.S. and Canadian construction industry, demonstrates strong operational performance and sustainable growth prospects.

Why BLD Fits the Quality Investing Criteria

• High Return on Invested Capital (ROIC): BLD’s ROIC (excluding cash and goodwill) is an impressive 73.94%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong EBIT Growth: The company has delivered a 5-year EBIT CAGR of 25.86%, reflecting improving operational efficiency and pricing power.
• Healthy Debt Management: With a Debt-to-Free Cash Flow ratio of 1.99, BLD can repay its debt in under two years using current cash flows, signaling financial stability.
• Profit Quality: BLD’s 5-year average Profit Quality (FCF/Net Income) is 110.48%, meaning it converts net income into free cash flow effectively.

Fundamental Strengths

BLD’s financial health is robust, with:

• A high Altman-Z score of 5.53, indicating low bankruptcy risk.
• ROE of 28.05% and ROA of 12.91%, outperforming most peers in the Household Durables industry.
• Improving margins, with Operating Margin at 16.89% and Profit Margin at 11.23%.

While valuation metrics like its P/E of 17.99 are slightly above industry averages, BLD’s strong fundamentals justify a closer look for long-term investors.

Our Caviar Cruise screener lists more quality stocks updated daily. For a deeper dive, review the full fundamental analysis of BLD.

Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.