Financial Trends -- 5/10
A classic late-cycle trough. Trex is the #1 composite-decking maker (~50-60% share), but three
consecutive down repair-and-remodel (R&R) years have left revenue essentially flat-to-down across
the window, gross margin compressed off its FY24 peak, and FY25 net income and EPS down double
digits. The one unambiguous positive is steady share-count reduction; the genuine defense is a
quarterly gross margin held flat YoY at ~40.5%. FCF is positive on a full-year basis but volatile
and below its FY23 peak, and a heavy Arkansas capex build has driven debt sharply higher. Net:
stable-to-soft trends, not a strengthening trajectory.
Weight: 25%
Gross Margin
40.5%
Flat YoY (Q1) | Defended vs D&A drag
FCF
Not Growing
Below FY23 peak | Gate NO
Share Count
Declining
Buyback-driven | No dilution
Quarterly Net Sales Trajectory ($M)
No clean acceleration or deceleration — bouncing along a trough.
Quarterly YoY swings are driven more by channel destock/restock than by underlying demand. Q4 is
a seasonal washout every year. Full-year revenue is range-bound in the low-$1.1B area, below the
FY21 peak of $1,197M. Management states FY26 net pricing is roughly flat (list price offset by
marketplace incentives), so revenue moves are volume/mix-driven.
Quarterly Gross Margin & Operating Margin (YoY)
Gross margin held flat YoY at ~40.5% in Q1'26 despite ~170-180 bps of Arkansas D&A drag.
Margin defense is the genuine positive in an otherwise soft quarter — GAAP operating margin
ticked up +30 bps YoY and adjusted EBITDA rose +1.8%, while adjusted EPS was essentially flat
(-1.7%). The story is stability at trough profitability, not expansion.
Annual Financial Summary (FY ends December)
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Net Sales ($M) | $1,196.95M | $1,106.04M | $1,094.84M | $1,151.45M | $1,174.27M |
| Rev YoY | — | -7.6% | -1.0% | +5.2% | +2.0% |
| Gross Margin | 38.5% | 36.5% | 41.3% | 42.2% | 39.2% |
| EBITDA Margin | 26.0% | 26.3% | 29.8% | 32.7% | 27.3% |
| Diluted EPS ($) | $1.80 | $1.65 | $1.89 | $2.20 | $1.78 |
| EPS YoY | — | -8.3% | +14.5% | +16.4% | -19.1% |
| Net Income ($M) | $208.7M | $184.6M | $205.4M | $226.4M | $190.4M |
| Diluted Shares (M) | 115.8 | 111.9 | 108.8 | 108.3 | 107.1 |
Key trends
- Revenue range-bound below the FY21 peak: $1,197M (2021) to $1,174M (2025) — three down R&R years, decelerating from +5.2% (FY24) to +2.0% (FY25), a ~320 bps deceleration
- Gross margin compressed off the FY24 high: 42.2% (FY24) to 39.2% (FY25), -300 bps; EBITDA margin -540 bps off the FY24 peak (32.7% to 27.3%)
- FY25 earnings declined double digits: net income -15.9% and diluted EPS -19.1% YoY
- Share count declining steadily: 115.8M (2021) to 107.1M (2025), -7.5% over four years, buyback-driven with no dilution
Free Cash Flow ($M)
FCF is positive but not growing — this fails the quality gate.
FY25 FCF of $125M is well below the FY23 peak of $223M, swung negative in FY24 (-$88M) on the
Arkansas capex build, and the most recent quarter (Q1'26) was -$143M (seasonally negative 1H).
"Positive AND growing" is not satisfied today; the growing-FCF story is a forward 2026-27
expectation contingent on the Arkansas capex roll-off, not a demonstrated trend.
Balance Sheet & Capex
Debt levered up to fund Arkansas; capex is now rolling off.
GAAP debt rose to $383M in Q1'26 (~1.32x net leverage) to fund the Little Rock plant build.
Quarterly capex has stepped down to $23.1M (from a $79.5M Q1'25 peak), and management guides
FY26 capex to $100-120M (from $233M in FY25) — the setup for the forward FCF inflection, not
yet realized. Diluted share count continues to decline (buyback-driven).
Score Rationale
Score of 5/10 reflects stable-but-soft financial trends — a category leader sitting in the trough of a three-year R&R downturn, not a strengthening trajectory.
Supports the 5:
- Quarterly gross margin held flat YoY at ~40.5% despite ~170-180 bps of Arkansas D&A drag — genuine margin defense
- GAAP operating margin +30 bps YoY and adjusted EBITDA +1.8% YoY in Q1'26
- Steady, disciplined share-count reduction (-7.5% over four years, no dilution)
- Category leadership and pricing power intact (price-setter, ~40% gross margins)
Weighs against a higher score:
- Revenue range-bound below the FY21 peak; decelerating from +5.2% (FY24) to +2.0% (FY25)
- Gross margin -300 bps and EBITDA margin -540 bps off the FY24 peak
- FY25 net income -15.9% and diluted EPS -19.1%
- Balance sheet levered up (debt to $383M, ~1.32x) to fund the Arkansas plant
Composite quality gate — positiveGrowingFcf: NO. FCF is positive on a full-year basis (FY25 +$125M) but not growing — below the FY23 peak of $223M, negative in FY24, and -$143M in Q1'26. The growing-FCF story is a forward 2026-27 expectation, not a demonstrated trend.
Data sourced from Daloopa (company_id: 6226). Fiscal year ends December 31. Market data from FMP (2026-06-28). All financials in USD.