Financial Trends -- 5/10
TREX is in a cyclical trough with the R&R market declining for a third consecutive year. Revenue is
essentially flat over 5 years ($1,197M in FY2021 vs $1,174M in FY2025). Margins compressed ~300bps
in FY2025 due to Arkansas facility startup costs and lower utilization. Diluted EPS of $1.78 in FY2025
is below the FY2021 level of $1.80 -- five years of no EPS growth. However, FCF turned positive in
FY2025 after a capex-heavy FY2024, sell-through (mid-single digits) is outpacing reported revenue due
to channel destocking, and the share count is declining ~2% annually. The trough is cyclical, not structural.
Weight: 25%
FY2025 Revenue
$1,174M
+2.0% YoY | Still below FY2021 peak
FY2025 Diluted EPS
$1.78
Below FY2021 $1.80 | No 5yr growth
FY2025 EBITDA Margin
27.3%
-400bps YoY | Arkansas startup drag
FY2025 FCF
$125M
Positive again | 10.6% FCF margin
Revenue Trajectory (USD M, Quarterly)
Highly seasonal business with choppy YoY growth. Revenue oscillated
between destocking-driven declines and normalization over the last 12 quarters. Q1-Q2 are structurally
the strongest quarters (spring deck-building season), while Q4 is consistently the weakest. FY2025 grew
only +2.0% following +5.2% in FY2024 -- the third consecutive year below the FY2021 peak of $1,197M.
Sell-through growth (mid-single digits per management) is better than reported revenue because of
channel inventory normalization. Consensus expects ~$1.25B for FY2026E (~+6%).
FY2021: $1,197M | FY2022: $1,106M (-7.6%) | FY2023: $1,095M (-1.0%) | FY2024: $1,151M (+5.2%) | FY2025: $1,174M (+2.0%). Data sourced from Daloopa.
Revenue YoY Growth Trend
Growth whipsawed between -30% and +61% on channel dynamics.
The extreme swings reflect destocking/restocking cycles rather than underlying demand changes.
Q3 2023 (+61.2%) and Q1 2024 (+56.5%) were easy-comp recoveries; Q3 2024 (-23.1%) and Q1 2025
(-9.0%) reflected channel destocking. The pattern has been stabilizing -- Q2 2025 (+3.0%) and
Q3 2025 (+22.1%) showed improvement before Q4 2025 dipped slightly (-3.9%) on seasonal weakness.
Data sourced from Daloopa.
Annual Revenue (USD M)
Revenue still below FY2021 peak after 4 years. FY2026E consensus ~$1.25B (+6%). Data sourced from Daloopa.
Margin Trends
Margins compressed ~300bps in FY2025 vs FY2024.
Gross margin fell from 42.2% to 39.2%, driven by lower utilization at legacy plants as the new
Arkansas facility ramps and higher raw material costs. Q4 seasonal weakness is structural -- low-volume
quarter with fixed cost underabsorption (Q4 2025 gross margin just 30.2%). EBITDA margin declined from
31.3% to 27.3% (-400bps), with Q4 2025 hitting just 12.7%. EBITDA declined from $376.6M to $320.9M
(-14.8%). The margin drag should ease as Arkansas ramps and the railing product mix transitions.
GM compressed by Arkansas startup costs and lower utilization. Q4 structural weakness from fixed cost underabsorption. Data sourced from Daloopa.
EBITDA Trajectory (USD M, Quarterly)
EBITDA declined -14.8% YoY from $376.6M to $320.9M.
The decline is attributable to Arkansas facility startup costs, lower utilization, and the railing
product mix transition. Q4 2025 EBITDA of just $20.4M (12.7% margin) reflects severe seasonal
underabsorption. Q1-Q2 are structurally the best quarters for EBITDA given spring building season
volumes. The H1 2025 vs H1 2024 comparison shows EBITDA stabilizing ($214M vs $264M).
FY2024 EBITDA: $376.6M (31.3% margin). FY2025 EBITDA: $320.9M (27.3% margin). -14.8% YoY. Data sourced from Daloopa.
EPS Trajectory (Annual)
Five years of no EPS growth.
Diluted EPS of $1.78 in FY2025 is below FY2021 ($1.80) and the FY2023 peak of $1.89. Adjusted
diluted EPS of $1.88 is similarly flat. Despite a -9.7% reduction in share count over 4 years
(115.1M to 103.9M), EPS has not grown, indicating the underlying earnings power has deteriorated.
Consensus expects recovery to ~$2.05 in FY2026E and ~$2.35 in FY2027E as margins normalize
post-Arkansas ramp and the R&R cycle turns.
FY2024 EPS not reported in source. FY2026E ~$2.05 | FY2027E ~$2.35 (consensus approximate). Data sourced from Daloopa.
Consensus Estimates vs. Actuals
| Metric | FY2025A | FY2026E | FY2027E |
|---|---|---|---|
| Revenue | $1,174M | ~$1,250M (+6%) | ~$1,350M (+8%) |
| Diluted EPS | $1.78 | ~$2.05 (+15%) | ~$2.35 (+15%) |
| EBITDA Margin | 27.3% | ~29-30% (recovering) | ~31% (normalizing) |
| FCF | $125M | ~$200M+ (lower capex) | ~$250M+ |
Consensus expects cyclical recovery, not a re-acceleration.
Street expects mid-single-digit revenue growth as R&R market stabilizes and wood-to-composite
conversion continues. EPS recovery to ~$2.05-$2.35 is predicated on margin normalization as
Arkansas facility startup costs subside and utilization improves. FCF should benefit from
significantly lower capex as the Arkansas build completes. The bull case requires
the R&R cycle to turn -- the bear case is another year of flat-to-down.
Consensus estimates approximate. Recovery dependent on R&R cycle turn and Arkansas ramp completion. Data sourced from Daloopa.
Free Cash Flow (Annual, USD M)
FCF recovered to $125M in FY2025 after negative FY2024.
FY2024 FCF was -$88M due to elevated capex (~$232M) for the Arkansas facility. FY2025 recovered to
$125M (10.6% FCF margin) but remains well below FY2023 peak of $223M. Capex should normalize as
the Arkansas build completes, which would unlock significantly more FCF. At normalized capex levels,
TREX could generate $200M+ in FCF, supporting continued buyback activity.
FY2024 FCF negative due to ~$232M capex for Arkansas facility. Capex normalizing in FY2026+. Data sourced from Daloopa.
Acceleration / Deceleration Analysis
| Signal | Detail | Direction |
|---|---|---|
| Revenue Growth | FY2025 +2.0% vs FY2024 +5.2%; annual growth decelerating but Q3 2025 spiked +22.1% | Mixed |
| Gross Margin | 42.2% to 39.2% (-300bps); Arkansas startup costs and lower utilization | Compressing |
| EBITDA | $376.6M to $320.9M (-14.8%); margin down -400bps to 27.3% | Declining |
| Diluted EPS | $1.78 in FY2025 vs $1.80 in FY2021; five years of zero EPS growth | Flat/Declining |
| Free Cash Flow | -$88M (FY2024) to +$125M (FY2025); positive inflection as capex normalizes | Recovering |
| Share Count | 115.1M to 103.9M (-9.7% over 4 years); ~2% annual reduction from buybacks | Declining (positive) |
| Sell-Through vs. Reported | Mid-single-digit sell-through outpacing +2% reported revenue; channel normalization ongoing | Positive signal |
Score Derivation
| Component | Assessment | Score |
|---|---|---|
| Revenue growth and trajectory | Flat over 5 years ($1,197M to $1,174M); +2% annual growth; choppy quarterly pattern | 3.5 |
| Gross margin quality | Compressed -300bps from Arkansas startup; still decent at 39.2% but trending wrong direction | 5.0 |
| EBITDA / operating leverage | -14.8% YoY decline; margin compressed -400bps; startup cost drag temporary | 4.0 |
| EPS trajectory | $1.78 in FY2025 vs $1.80 in FY2021; zero growth over 5 years despite buybacks | 3.0 |
| FCF generation | Recovered to $125M (+10.6% margin); negative in FY2024 was capex-driven, not operational | 6.0 |
| Capital return / dilution | -9.7% share reduction over 4 years; ~2% annual buyback; no dilution | 7.0 |
| Penalty modifiers | No penalties: FCF positive, no dilution, no debt growth faster than revenue | 0 |
| Final Score | Cyclical trough, not structural; FCF positive, no dilution | 5/10 |
Data sourced from Daloopa.