On Tuesday, B.Riley maintained a Buy rating on Azek Co. (NYSE: AZEK) and raised the price target to $52 from $50. This adjustment follows Azek's announcement of preliminary financial results for the second quarter of fiscal year 2024, which exceeded expectations.
The company, known for its building products, reported strong demand as it enters the spring building season, bolstered by recent gains in shelf space and new product shares.
Azek announced last week that the encouraging quarter led to an increase in its full fiscal year 2024 sales and adjusted EBITDA guidance, with a 1.2% and 2.6% rise at the midpoint, respectively. The company is on track to achieve its adjusted EBITDA margin goal of 27.5% ahead of the original forecast for fiscal year 2027. These internal initiatives are aimed at driving growth and improving margins.
Despite the positive outlook, Azek disclosed a delay in its 10-Q filing due to the discovery of incorrect inventory and cost of goods sold entries by a former employee.
The company will make historical restatements to correct its first-in, first-out (FIFO) accounting records. However, Azek assures that this will not affect future reports and is largely considered a non-event by B.Riley.
B.Riley's analyst noted that based on Azek's strong performance and upward trajectory, they are modestly adjusting their estimates. The firm's confidence in Azek is reflected in the increased price target and the reiterated Buy rating, signaling continued optimism for the company's financial growth and market performance.
InvestingPro Insights
As Azek Co. (NYSE: AZEK) continues to make headlines with its robust financial performance and upward trajectory, insights from InvestingPro provide additional context to the company's valuation and stock behavior. With a market capitalization of $6.51 billion and a P/E ratio of 56.29, Azek's valuation reflects its growth prospects. Notably, the company's PEG ratio for the last twelve months as of Q1 2024 stands at 0.21, indicating potential undervaluation relative to its earnings growth rate.
InvestingPro Tips highlight that Azek is expected to see net income growth this year, with four analysts having revised their earnings estimates upwards for the upcoming period. This aligns with the company's strong demand and increased guidance for fiscal year 2024. Additionally, Azek's stock has experienced significant volatility, but it also boasts a high return over the last year, with a price total return of 79.46%. Despite trading at high valuation multiples across various metrics, such as EBITDA and revenue, Azek operates with a moderate level of debt and its liquid assets exceed short-term obligations.
For investors seeking a deeper dive into Azek's financial health and stock performance, InvestingPro offers a comprehensive suite of additional tips. With a total of 16 InvestingPro Tips available, including insights into profitability and analysts' predictions, interested parties can explore these at https://www.investing.com/pro/AZEK. To further enrich your investment research with InvestingPro, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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