Beacon Roofing Supply: Cheap At 11x Normalized FCF

Summary

• At less than 7.5x 2022e free cash flow per share, the market views Beacon's current results as unsustainable.
• While housing tailwinds have helped cause Beacon's EBITDA to more than double since 2019, the company has improved operations under new management.
• In the past four months, insiders have purchased nearly $7 million worth of stock.
• Assuming some reversal of housing market tailwinds, I estimate Beacon can sustainably generate $5 per share in free cash flow.
• Trading at just 11x my normalized estimate of free cash flow per share, I see 20-40% upside in Beacon stock.

RyanJLane

Shares of Beacon Roofing Supply (BECN) are down 17% from their 52-week high as investors are concerned about the sustainability of current results. While I agree that the business likely over-earned in 2022, I believe the company is capable of generating

Analyst’s Disclosure:I/we have a beneficial long position in the shares of BECN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.