Investment Thesis
TopBuild exhibits fundamental deterioration with near-zero revenue and net income growth, severely impaired capital returns (4.4% ROE, 1.6% ROA), and diluted EPS despite flat earnings. While the company generates strong free cash flow and maintains adequate liquidity, it is not deploying capital efficiently or generating adequate shareholder returns relative to its leverage profile.
Strengths
- Strong free cash flow generation ($146.7M annually, 10.1% FCF margin)
- Healthy liquidity position (2.00x current ratio, 1.41x quick ratio) and solid interest coverage (9.3x)
- Asset-light operational model with minimal CapEx requirements ($14.0M or 1% of revenue)
Risks
- Alarmingly low capital returns (ROE 4.4%, ROA 1.6%) indicate severe capital inefficiency and value destruction
- Stalled growth trajectory (1.5% revenue growth, 0% net income growth YoY) with declining EPS (-9.9% YoY) suggesting shareholder dilution
- Elevated leverage (1.18x Debt/Equity ratio) with $2.8B long-term debt relative to $2.4B equity in low-growth environment
Key Metrics to Watch
- Return on Equity trend and revenue growth acceleration indicators
- Debt/Equity ratio trajectory and refinancing risk with elevated leverage
- Operating margin stability and gross margin pressure in competitive construction sector
Financial Metrics
Revenue
1.4B
Net Income
104.8M
EPS (Diluted)
$3.73
Free Cash Flow
146.7M
Total Assets
6.7B
Cash
268.8M
Profitability Ratios
Gross Margin
27.7%
Operating Margin
12.1%
Net Margin
7.2%
ROE
4.4%
ROA
1.6%
FCF Margin
10.1%
Balance Sheet & Liquidity
Current Ratio
2.00x
Quick Ratio
1.41x
Debt/Equity
1.18x
Debt/Assets
64.2%
Interest Coverage
9.31x
Long-term Debt
2.8B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-07T08:11:59.465145 |
Data as of: 2026-03-31 |
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