Investment Case Updated: May 2, 2025

Ticker: BLDR
Market capitalization: $12.7B
Enterprise value: $17.7B
Price: $111.93 (5/1/25)

What the Company Does

BLDR is a leading supplier of building products and services to professional homebuilders in the United States. Management has been focused on growing “value-added” products and services to builders, which means that BLDR provides labor or services that could have otherwise been done by the contractor. These bundled solutions, which now comprise roughly half of all revenues, often help customers shorten build times while improving efficiency and profitability for BLDR while potentially increasing the stickiness of BLDR’s offerings.

Why We Own It

BLDR is a dominant player in a fragmented industry at a compelling valuation with ample room for growth. Management estimates a total market size of $110B for new single-family materials alone, implying that BLDR’s market share of 11% has plenty of room to take share from or acquire smaller players, potentially providing more pricing power in the future. New single-family construction represented ~71% of BLDR’s FY24 revenues, while multi-family and remodel market segments are 11% and 14% of revenues, respectively, in even larger addressable markets. Over the past five years, BLDR has averaged a return on equity of 40.3%, implying a high-quality business. Although the company continues to navigate a volatile macroeconomic backdrop that is pressuring both top-line growth and profitability in the near-term, management expects to maintain double-digit EBITDA margins this year despite single-family housing starts slumping back to pre-pandemic levels (when BLDR’s margins ranged between 6-9%).

Despite the high business quality, strong industry position and room for continued profitable growth, BLDR’s valuation implies little growth ahead at a trailing-twelve-month free cash flow yield of 10%. BLDR trades at a forward (FY26) EV/EBITDA multiple of 8.6x, while other leading distribution companies (FAST, FERG, GWW, WSO, POOL) trade between 13x and 24x next year’s EBITDA estimates.

How Management Allocates Capital

Management has four priorities – 1) Maintain a strong balance sheet with a leverage ratio between 1.0x and 2.0x EBITDA, 2) Grow organically, 3) Buy others, 4) Repurchase shares. Although leverage is currently near the upper end of management’s leverage target range, management remains committed to returning capital to shareholders and investing in growth, as evidenced by a $500MM incremental repurchase authorization announced after 1Q25 results. Of the $4.7B of capital deployed over the past two years, nearly 71% has gone toward share repurchases, representing approximately 19% of the average market cap over the same time period. Management previously guided for capital deployment between $5.5B and $8.5B between 2024 and 2026, which after $2.2B of capital deployed in FY24, implies another $3.3B to $6.3B of capital to be deployed over the next two years, or between 26% and 49% of the current market cap.